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Management SkillBerde, Csaba

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Management SkillBerde, Csaba

TÁMOP-4.1.2.A/1-11/1-2011-0009

University of Debrecen, Service Sciences Methodology Centre

Debrecen, 2013.


TartalomTárgymutató ......................................................................................................................................... 11. 1. Concepts of Management ............................................................................................................. 2

1. References ............................................................................................................................. 52. 2. A History of Management ............................................................................................................ 6

1. 2.1. The age of the classic management school (1880 to 1920) ............................................. 62. 2.2. The theory of human relations (1920 to 1945) ................................................................ 93. 2.3. The trends of objective rationalism ............................................................................... 104. 2.4. Humanistic trends .......................................................................................................... 125. References: ........................................................................................................................... 13

3. 3. The concept and understanding of an organization ................................................................... 161. 3.1. Classical organization theory ........................................................................................ 172. 3.2. Principles of the neoclassical approach ......................................................................... 193. 3.3. The contingency or situational approach ...................................................................... 204. References ............................................................................................................................ 20

4. 4. Structural characteristics of organizational forms ..................................................................... 221. References: ........................................................................................................................... 26

5. 5. Economic classification of organizations .................................................................................. 271. References: ........................................................................................................................... 29

6. 6. Classifications of Organizations by Mintzberg: How to Understand the Structure of an Organization ............................................................................................................................................................ 30

1. 6.1.The Entrepreneurial Organization .................................................................................. 322. 6.2. The Machine Organization (Bureaucracy) .................................................................... 323. 6.3. The Professional Organization ...................................................................................... 334. 6.4. The Divisional (Diversified) Organization .................................................................... 335. 6.5. The Innovative Organization ("Adhocracy") ................................................................ 336. References ............................................................................................................................ 34

7. 7. The concepts and dynamics of groups ....................................................................................... 361. 7.1. The concept of groups ................................................................................................... 362. Primary and secondary groups ............................................................................................. 363. 7.3. Classification of groups- Group scale ........................................................................... 374. 7.4. The classification of groups-the formality .................................................................... 375. 7.5. Internal interaction and dynamics ................................................................................. 386. References ............................................................................................................................ 41

8. 8. The management of groups ........................................................................................................ 441. References ............................................................................................................................ 48

9. 9. Corporate culture ....................................................................................................................... 511. 9.1. Typology of cultures ...................................................................................................... 532. References ............................................................................................................................ 56

10. 10. Managerial Methods .............................................................................................................. 571. 10.1. Participative management ........................................................................................... 572. 10.2. Total quality management ........................................................................................... 573. 10.3. Management by walking around ................................................................................. 584. 10.4. Management by objectives .......................................................................................... 585. 10.5. Employee empowerment ............................................................................................. 596. 10.6. Self-managed work teams ........................................................................................... 597. 10.7. Quality and total quality management ........................................................................ 598. References ............................................................................................................................ 62


Management Skill

11. 11. Managementchange I. ............................................................................................................ 631. References: .......................................................................................................................... 67

12. 12. Managing change II. .............................................................................................................. 691. References: .......................................................................................................................... 74

13. 13. Managerial styles ................................................................................................................... 761. 13.1. Decision centered managerial styles ........................................................................... 772. 13.2. Personality centered managerial styles ....................................................................... 793. References ............................................................................................................................ 82

14. 14. Managerial Ethics vs. Social Responsibility .......................................................................... 831. References ............................................................................................................................ 88

15. 15. Organizational development .................................................................................................. 901. References ............................................................................................................................ 94

16. 16. Questions ............................................................................................................................... 96


Az ábrák listája1.1. Figure 1: Planning: The foundation of management (own graph) ................................................ 41.2. Figure 2: Steps in planning (own graph) ....................................................................................... 41.3. Figure 3: Decision making (own graph) ....................................................................................... 54.1. Figure 1.: Classification of organizations by scale (based on Dobák, 1997) .............................. 224.2. Figure 2.: One dimension structure(based on Dobák, 1997) ...................................................... 224.3. Figure 3.: Labor division – one dimensional organization (own figure) .................................... 234.4. Figure 4.: Division of labor-two dimensional organization (based on Dobák, 1997) ................ 244.5. Figure 5.: Vertical coordination (based on Dobák, 1997) ........................................................... 244.6. Figure 6.: Horizontal coordination (based on Dobák, 1997) ...................................................... 244.7. Figure 7.: Multi line organization (based on Dobák, 1997) ........................................................ 255.1. Figure 1.: Linear (Line) organization(own figure) ..................................................................... 275.2. Figure 2.: Functional organization (own figure) ......................................................................... 275.3. Figure 3: Divisional organization (based on Dobák, 1997) ........................................................ 285.4. Figure 4.: A matrix organization (own figure) ............................................................................ 286.1. Figure 1.: Mintzberg's Organizational Types(Source: Internet 1) ............................................... 316.2. Figure 2.: Machine organization(Source: Internet 1) .................................................................. 326.3. Figure 3.: Adhocracy(Source: Internet 1) ................................................................................... 347.1. Table 1: Changing nature of groups caused by the increase of the membership (based on Dienesné, 2002. .................................................................................................................................................. 377.2. Table 2: Differences of formal and informal groups (based on Berde et al.,1998). ................... 387.3. Table 3. Benefits and drawbacks of group membership (based on Blau (1964) and Homans (1961)) ............................................................................................................................................................ 387.4. Figure 1: Basic situation of the Milgram experiment (based on Internet 2). .............................. 407.5. Table 4: Factors affecting cohesion (based on Szilágyi - Wallace(1983)). ................................. 418.1. Figure 1: The Hawthorne layout ................................................................................................. 458.2. Figure 2: The managerial process of group operation (based on own examination) .................. 479.1. Figure 1. The levels of culture (based on Schein(1980, 1985, 1994)) ........................................ 519.2. Figure 2: The competing values framework (based on Cameron et al.(2006)). ......................... 5411.1. Figure 1: The process of change(based on Lewin(1975)) ......................................................... 6411.2. Figure 2.: Change to act (based on Internet 1) .......................................................................... 6611.3. Figure 3.: The elements of change management (based on Internet 1) .................................... 6712.1. Figure 1: The classification of the preventing factors of change (own examination) .............. 6912.2. Figure 2: Activity in the process of change (based on Kotter (1999)) ...................................... 6912.3. Figure 3.: The black hole effect (based on Conner (1993)) ...................................................... 7112.4. Figure 4.: Kotter’s 8 step method (based on Kotter (1999)) ..................................................... 7212.5. Figure 5.: Evaluation of change management methods (own examination) ............................. 7313.1. Table 1: Decision centered managerial styles (based on Berde-Láczay(2005)). ...................... 7713.2. Figure 1.The Tannenbaum-Schmidt model (based on Internet 1). ........................................... 7813.3. Table 2: The classification of managerial styles by the direction of managerial attention (based on Berde-Láczay(2005)). ........................................................................................................................ 7913.4. Figure 2. The managerial grid (based on Internet 2). ............................................................... 8013.5. Table 3: The contingency styles (based on Internet 3). ............................................................. 8013.6. Figure 3: The managerial transition(based on Williams(2011)). .............................................. 8114.1. Figure 1: CSR system (based on Porter - Kramer, 2006). Above, see a diagram of the intended roles of CSR within businesses. ................................................................................................................. 8815.1. Figure 1: The change of managerial functions (based on Véry(2009)). ................................... 9115.2. Table 1: The advantages of using each types of consultants-internal or external (based on McLean(2006)). ................................................................................................................................. 91


Management Skill

15.3. Figure 2: The organizational development medical like model (based on Kinicki-Williams (2011)) by adapting the work of French-Bell(1978) and Huse-Cumming(1985)). ........................................ 92


Tárgymutató


1. fejezet - 1. Concepts of ManagementGroups of human beings have been involved in great building projects for millennia. As one example, formal organization was required in the construction of the Great Pyramids. Organization of the labor needed to complete these fantastic projects included the position of at least one overseer (a kind of ancient manager) and groups of workers requiring motivation, organization, direction, critique and assignment.

Yet, despite the passing of countless years during which humans have been involved in such working relationships with one another, the actual development of any concept and/or principles of management is relatively a modern phenomenon. The relative modernity of management as, for instance, a topic of study does not mean that formal management is something very recent. As humans have managed groups, communities and organizations even during such activities as prehistoric hunting and gathering, there was always a necessity to follow a leader or a group of decision makers responsible for the survival and welfare of the group as a whole.

A modern company is not all that different from their ice age predecessors. Without responsible organization and management, a company would quickly begin to starve of sustenance (i.e. capital) and soon perish, leaving its employees without a means of daily survival (i.e. wages or salaries). The centuries old evolution of societies from simple to complex has also witnessed the emergence of specialized organizations and departments of governing authorities. Whether one considers the city states of ancient Greece, the kingdoms of the Middle Ages or modern republics, the need for and roles of managers have increased as human organizational structures have become greater in size and more complex in structure. There is of course ample historical evidence in this regard. Consider only the attributes required of Alexander the Greatover 2,300 years ago, to be able to conquer most of the then known world and to set up a government to rule his newly won Empire. The Persian Empire lasted over 2,000 years, spanning Babylon, Egypt, Central-Southern Asia, Asia Minor and parts of Northwestern India; the Roman Empire was a complexly administered series of interwoven hierarchies and administrative bodies, ruled by an Emperor, who granted power to regional rulers over vast territories, such as Gaul or Pannonia. For the almost fifteen centuries preceding World War One, kings and their ministers and/or Archbishops and their feudal bureaucracies ruled over most of Europe, slowly giving way to the rise of the merchant guilds,whose highly profitable trading activities required theorganization and management of individual and networked workshops and, of course, the artisans and apprentices these employed.

Yet, it was largely the emergence of the Industrial Revolution, especially in Great Britain and the United States, which necessitated a systematicapproach to management. The development and application of new technology,the as yet unseen increase in the size of the work force, the sheer scale of mass production and distribution – all these elementswould have been impossible without the parallel development of effective coordination and oversight.Still, management was not recognized as a "technology". Between the end of the 19th century and the mid-20th century, FredericW. Taylor and several others formulated a management approach, which is described as theScientific Management Theory. (Compare Witzel, 2003)

The four basic principles of Taylor's theory were:

i. the development of true science of management, in order that the best method for performing each task assigned to a worker could be determined,

ii. the scientific selection of workers, so that each worker would be given responsibility forthe task for which he or she was best suited,

iii. the scientific education and development of the worker, and

iv. close, friendly cooperation between management and labor.

Taylor advocated that a complete mental revolution on the part of management and workerswas required for the success of these principles. In fact, Scientific Management was concernedwith increasing the productivity of both, the shop as well as the individual worker. Soon theregrew another theory, i.e. the Classical Organizations Theory.

Henri Fayol (1841-1925), the founder of the Classical Management School,took the view thatscientific


1. Concepts of Management

forecasting and a proper method of management made satisfactory results inevitable. Fayolemphasized that management was not a personal talent, but a skill, similar to any other. The general belief up to Fayol’s time had been that ‘managers were born, not made’.In other words, practice andexperience would be helpful only to those who already had the innate qualities of a manager.This was a rather aristocratic view of who could be a leader; leaders were born into families, which somehow passed the necessary management skills and talents down from generation to generation of first-born male descendents. Despite to significant pressures to maintain this thinking and social practice, Fayol defended the opinion that management could indeed be taught - once its underlyingprinciples were understood and a general theory of management was formulated.

In order to develop a science of management, Fayol divided business operations into sixactivities:

1. Technical

2. Commercial

3. Financial

4. Security

5. Accounting

6. Management

Furthermore, Fayol defined management in terms of functions, such as:Planning, Organizing, Coordinating and Controlling.

At the end of World War II, at least in the West, an era of never-before seen demand led to a boom in production activity which especially grew the American economy like no other before. Simply put, the rate of production meant that more of practically everything was required. Quantity backed by efficiency became the guiding principle: an era of optimization was born, driven by suppliers’ choice, rather than customers’ wants. Japan restarted its devastated economy with a different orientation: Quality. The key was to develop and ensure a true economy of all resources, with the customer as the focal point. The Japanese at that time did not have the luxury of a surplus funded, hungry market and so it sought to pursue an export-driven market – as it still does today. By the late 1960s, demand tended to slow down and the growing competition gave customers greater choice. ‘Quality,’ as an important buying criterion, emerged. The OPEC crisis in the mid-1970s changed everything: Energy, the prime mover of the industrial world, suddenly became very expensive. The demand boom faded – with customers demanding quality and lower prices and better service.

This new situation meant that management had to change how it planned and assigned tasks. The division of labour seen before World War II meant that work could be organized/grouped into a set of specific, related tasks.These tasks were repetitive in nature, with employees trained to perform ONLY this set of tasks, so that the efficiency of task performance was maximized. When extended throughout an organization, this took the form of specialization - organizations benefitted from maximum use of specialist skills. Economically and under supply-shortage conditions, this worked well.Much of this was an extension of trade/craft skill-groups organization (guilds), which was the hallmark of pre-industrial ‘production’.

Mintzberg developed concepts in answer to the challenges put to management, brought about through the rapidly changing economy. He envisions three central managerial roles within an organization:

The first is the Interpersonal role. In this role, the manager may act as a figurehead. This kind of manager is a symbolic head of an organization and this individual is required to show his/her ‘face’ in social and legal situations. Their role may be largely ceremonial. Steve Jobs often played this role when launching Apple’s newest products in highly choreographed media events.There is also within this interpersonal role the role of the organizational leader, motivating & directing subordinates in e.g., the planning and realization of a project.Additionally, there is the liaison aspect of this kind of role, involving networking activities with those outside one’s own organization, in order to gather valuable – even vital – information. This role requires presence, experience and respect within one’s own industry.

The second role is the Informational role. The manager in this role may function as a kind of monitor. This manager acts as a kind of central nervous system for the organization, interpreting and acting on impulses throughout the organization and the related industry. This manager creates and issues reports, in order to guarantee certainty and continuity in the organization. There is also the related element of the manager as a



disseminator, who networks within the organization, holding meetings to ensure informational flow and exchange, to correct misunderstandings and to assess, define, redefine and assure compliance and achievement down through the hierarchy of those below him/her. Moreover, this role includes the tasks of company spokesperson. This managerial role means that one must, at times, transmit an organization’s intent to outsiders.In times of crisis or misunderstanding, such a role may be vital to fend off possible legal threats or losses of customers.Mintzberg also tells us that there is also the Decisional role itself; this role perhaps being the most traditional management role. This is the role of the manager as Entrepreneur, searching for new opportunities, finding these and reacting to them, by e.g. developing a new strategy plan. This role may also see the manager as a Troubleshooter, handling unexpected disturbances in ongoing projects or in inter-employee relations. There is also the Contingency managerial element. This managerial role focuses on resource allocation, initiating and/or approving changes in policy or budgeting.Finally, there is the managerial role as a negotiator, fighting to get the best deal for one’s organization and winning new contracts to ensure business and success.Katz, among others, recognized three main grouping s of skills managers needed to hone, in order to be effective in this new economic situation:

1. Technical skills, meaning the application of specialized knowledge or expertise acquired though formal training and its use.

2. Human skills or the ability to work with people, to understand and to motivate groups and individuals.

3. Conceptual skills, which include the mental ability to recognize, analyze, diagnose and think through complex situations. (Compare Derek - Hicjson, 2007)

Still, it is not possible to give any onesimple definition of management. All existing definitions keep changing because of thechanges in the environment of organizations. Without going into the complexities of theproblem, let us take a definition which has been more acceptable, i.e.: Management is theprocess of planning, organizing, leading and controlling the efforts of organization membersand of using all other organizational resources to achieve stated organizational goals. Any process is a systematic way of doing things; therefore, management is a process, too, because the interrelated activities of planning, leading,organizing and controlling are part of a manager's engagement.Managers use all the organizational resources (e.g., finances, equipment, information,technology and people) to achieve stated goals.Each organization has its own stated goals and management, as a process, helps inenhancing the attainment of these goals.

Planning involves several steps, the most basic evident below:

1.1. ábra - Figure 1: Planning: The foundation of management (own graph)

However, once past this most basic stage, planning becomes more complex, as evident in the second diagram:

1.2. ábra - Figure 2: Steps in planning (own graph)

The methods used by a manager to develop a plan for business success are complex and interdependent. Decision making takes place under varying degrees of uncertain conditions and risks. Techniques used to aid the process are:



• Risk analysis: every decision is based on interactions amongst different factors/variables – each of which have their own probabilities (towards ‘success’). Analysis of these probabilities yield a risk profile for each alternative path. In the absence of defined probabilities, estimates can be used.

• Decision trees: the outcome (measure pre-decided e.g. cost or time) of every step in the decision is charted and a course selected on the most favorable outcome. Very much like making a trip, navigating by using a road-map. (Koontz, H. - Weihrich, H., 2004)

• Flow Charts: as a process-guide to taking a decision and helps as a check-list of key variables, the sequence in which they fall and the interrelations. Key to making a choice or re-examining the paths taken are also indicated as risk-reduction devices. (See example in Koontz, H. - Weihrich, H., 2004, especially Figure 8-5)

• Decision Support Systems: a wide variety of (proprietary) computer based programs are available for managers to use their time more effectively for decision making of semi-structured tasks – by providing alternative evaluations. They focus on the process of decision making, taking data provide by the management information systems in enterprises.

Below is a basic diagram on decision making:

1.3. ábra - Figure 3: Decision making (own graph)

Invariably, concepts of management have developed and continue to do so, as the economic world changes. There is no magic solution towards a perfect form of manager, just as there is no individual embodying the perfect manager.

1. ReferencesKoontz, H. - Weihrich, H.(1988): Management, 9th Ed., McGraw-Hill Book Co., Singapore.

Koontz, H. - Weihrich, H.(2004): Management – a global perspective. MacGraw-Hill Co., New York.

Mintzberg, H.(1994): The Rise and Fall of Strategic Planning: Reconceiving the Roles for Planning, Plans, Planners, Free Press.

Robbins, S.P. - Coulter, M.(2004): Management. Prentice Hall, NJ.

Witzel, M.(2003): Fifty key figures in management. Routledge, London.

Derek, S. P. - Hickson, D. J.(2007): Great Writers on Organizations: The Third Omnibus Edition, Ashgate Publishing, London.


2. fejezet - 2. A History of ManagementManagement is as old as the human race; however, we know it well that some types of management roles and forms of behavior (pack leaders, queen bees etc.) can be observed in the animal kingdom as well. During the history of mankind, management tasks appeared first when it came to operating, controlling and organizing the first societies, like in the case of leading countries, armies and churches. Management also appeared in prehistoric societies as well when labor and labor processes had to be organized. Activities like hunting, obtaining food, self-defense or large-scale constructions, river control, construction of dams, irrigation networks, pyramids or cathedrals all required very serious management, organizing and controlling tasks. The structure, operation and control of world churches provide a lot of management experience and lessons for modern companies even nowadays. Unfortunately, very few written accounts were made about the management experience of old times and only small portion of them has survived (Sneider, 1981).

The appearance of independent economic organizations in the second half of the nineteenth century brought radical changes in management thinking. The operation of production organizations employing more and more workers brought forward the issues of organizing work. Modern “management” appeared when the first economic organizations, companies were established.

The first writings on the topic covered the organization of company-like activities but issues of control appeared at the end of the nineteenth and at the beginning of the twentieth centuries.

Taylor's Principles of Scientific Management is considered to be the first scientific book on the topic (Taylor, 1983). Marosi thinks that economic company theories actually tell little about the structure, organization and management of companies. Marshall is noted as one of the classic authors whose researches in economic history give some comprehensive answers to the questions of development of company organizations. Economists examined primarily the problems of costs, cost theories, efficiency and profitability. However, until recent times, economics has not cleared up such comprehensive issues as (1) how companies organize their production, (2) what directions, why and under what influence the organizational forms of production develop, (3) what internal controlling organization or management organization develops and how this organization reacts to production itself and (4) the role of human factors, emotions, attitudes and human conduct and behavior in the production processes. In fact, it is not the task of economics to examine these issues (Marosi, 1988).The first people who ventured to clear up and answer the above mentioned questions were experts who became managers from technologists and technocrats, like Taylor and Fayol. Later, sociologists, psychologists and social scientists began to examine the human issues of company operation. Experts from technical, technological fields and those with engineering views created trends characterized by strongly rational thinking in management. On the other hand, experts from the fields of human and social sciences created trends, which places human behavior and factors in the center. Consequently, two well-separated scientific concepts and paradigms can be recognized in management thinking. The former one can be called “objective rationalism”, while the latter one can be called “humanism”.

These two approaches have gone through the entire history of management and they can be recognized in each trend. When introducing the development of management thinking, we follow time order and we also classify and group the trends, theories accordingly.

1. 2.1. The age of the classic management school (1880 to 1920)At the end of the nineteenth century, as a result of the development of technology, industrial production was booming in Europe and America as well. The primary management issues were related to the organization of production. The various tendencies of economic development appeared in the organization of companies too. The appearance and spread of railroads played a defining role in the development of differences between Europe and America (Chandler, 1977). In America, the long distances and the economic opportunities generated large-scale railroad constructions never experienced before. As a result, huge companies were established. The Pennsylvania Railroad Company already had 110,000 employees in 1890 but due to the long distances the owners could not take part in the control of the constructions. Thus, the ownership and management functions


2. A History of Management

became separated quite early. Parallel to this, a great number of poorly skilled and illiterate workers were available. The large-scale constructions, the rapid economic development created a large number of job opportunities but the workforce available was largely unskilled.

In contrast, in Europe, companies evolved and were organized as a result of a natural development process. The owners and their family members managed the companies themselves, so the ownership and management functions were not separated (Kocka, 1969). The workforce was constant, appropriately skilled and characterized by loyalty and trust. These development tendencies, clearly visible in the economy, largely defined and actually created the basis of the different management philosophies and theories (Troitzsch, 1977). Learning about these processes helps us understand and interpret the differences and identities of the various management theories.

The management theories, which appeared at the turn of the 19th and 20th centuries can be considered classic based on their significance and effects. These theories, for the first time, tried to define the interrelations of management by using scientific methods. These theories can be summarized as classic management schools. The trends of the classic school are clear and it is obvious which findings had significant effects on the development of management. It is easy to describe the classic school, since it is not hard to evaluate the various theories from a nearly 100-year old perspective. Management literatures define three basic trends within the school:

• scientific management: represented by Frederick W. Taylor (1856 to1915),

• industrial administration: represented by Henry Fayol (1841-1925) and

• bureaucratic theory of management: represented by Max Weber (1864 to1920)

“Scientific management” was laid out in its final form in Taylor's Scientific Management Taylor, 1911). As a result of the peculiarities in American development, a management trend could evolve which considered the precise and scientific organization of labor as its main task. Taylor thought that the search for the technology of performing a given task should not be left to the workers but it should be planned in advance by using scientific methods and then the workers should be ordered to carry it out.

Based on this principle, Taylor separated physical and mental work. He also thought that the tools, the technology, the actions of work and their elements and time should be made uniform and standardized.

As a consequence of this, Gilberth developed his so-called motion study labor-organizing method. Based on this, a quarter of a century later MTM (Methods-Time-Measurement) was developed (Gilbert, 1911). Taylor thought that the method of task management should be applied. The workers have predetermined tasks and their wages are differentiated according to the performance of these tasks.

Taylor implemented the method of measuring and regulating actions of work in three phases. In the first phase, he carried out studies. In order to learn about work processes as much as possible, he divided the process into actions. By doing so, he could study how long it took to perform an action and the difference between the methods of experienced and poorly performing workers. The second phase was performing experiments. In this phase, Taylor selected the best elements of performing work based on the methods of well-performing and experienced workers. Then he organized these elements into a process. In the third phase, he made the “best way” developed during his experiments into rules. He made these rules mandatory methods for all workers. This regulation phase made it possible that production units achieved the required results even without a manager. The regulation covered the correct proportion between working time and leisure time. During the experiments, it became obvious that people can work with more efficiency if working and leisure periods follow each other in a reasonable way depending on the workload. Taylor noted that without the exact observation of leisure time periods even the best workers would have become entirely exhausted in four hours and they would have never achieved their assigned performance.

It should be emphasized that the individual performance-related pay system is a “Taylorist” invention. In Taylor's view, financial incentive played a central and exclusive role. He thought that the workers were interested only in money and they were willing to achieve higher performance only for higher wages.

This opinion led to the view according to which taylorism considered man “homo oeconomicus” who was willing to do anything only for money. Functional management is one of Taylor's most controversial views. This view states that by elimination one-person management, operation will have several functional managers. Taylor



was not able to realize the system of a functional management without one-person management even at the company managed by himself. Later, he modified this principle and said that an organization having functional management combined with one-person management should be created.

Functional management was the first where technologists, programmers, job analysts, time calculators, quality inspectors and maintenance workers, that is, people with functional jobs were employed. From theoretical and practical viewpoints, the issue of having one-person management in the functional management is rather secondary. However, it is a fact that management without one-person leadership did not work. Neither Taylor nor anyone else could prove the experience of this management form in practice. However, it is very significant that by creating functional and special units, Taylor proved that production should be carried out based on procedures and solutions, which are scientifically devised by specialists. Technological development makes the introduction of functional management necessary. By doing so, the specialists' expertise and skill came to play a significant role in the management of production and functional experts became the parts of corporate power.

The effects and significance of “scientific management” is almost immeasurable not only because it was the first written scientific work on management theory but its influence has determined the development of management and management thinking and it became the starting point and basis of several new trends.

The causes and circumstances leading to the development of “industrial administration”, represented by Henry Fayol (1841 to 1935), a French mining engineer, showing a lot of similarities to taylorism since these two trends were developed nearly at the same time.

In order to increase profits and due to the development of technical and organizational relations, organization-related expectations grew stronger in Europe as well. The difference was due to the smaller geographical area and the different features of social and state development of Europe. As mentioned above, in America mostly unskilled workers were available, while in Europe and especially in Western Europe the industrial traditions created far more skilled workers. It was not a coincidence that Taylor focused on the better organization of the work to be done. Some of Taylor's critics noted that the main point of his work was to teach the workers how to work. In contrast with this, the European managers, who employed far more skilled workers, focused on increasing other areas of efficiency.

In his most famous work, “Administration industrielle et générale” (Industrial and general administration), Fayol wrote that the tasks of controlling and coordinating implementation and the administrative tasks are quite similar in both the industrial and the state administration organizations. Although Fayol took experience from industrial practice, he considered his organization and administrative findings valid in both the private and the state administration (Fayol, 1916).

Fayol was a learned engineer and similarly to Taylor, he knew his own field very well. His career, similarly to Taylor's, was that of a typical manager's. Fayol began to work in his profession then his attention was focused on issues related to the organization and management of labor. He applied his own principles of organization in practice after obtaining experience, performing and evaluating experiments. However, his situation was different from Taylor's since he tried to correct a metallurgical and mining company in serious trouble as its general manager.

The difference between Fayol's and Taylor's work was determined by the difference between their direct actions within their own companies. While Taylor focused on the work to be done and the organization of labor at the level of middle managers, Fayol, in his function, sought to devise principles and methods which covered all corporate activities and focused primarily on management. Fayol recognized the fact that beside the specialized professional activities a company and all other organizations needed scientific management and organizing activities, which he called administration. He also thought that administration contained the same elements in any organization established for some purpose. By applying his teaching to the state administration, the “industrialization of the state” or the application of proven management and organizing principles to state organizations began.

Fayol tried to place management among the functions of a company and he also tried to set out the management functions in a system. This effort started a long series of actions, which all have been trying to define and classify the management functions up to this day without achieving any scientifically acceptable results. Fayol stated the functions of management as follows: prediction (prognosis and planning), organization, motivation and inspection.

The bureaucracy theory devised by Max Weber states that a bureaucratic organization has strict hierarchical and



subordination relations. Its members are skilled officials who do their jobs in a strictly defined order. Administration is done along predictable guidelines. Bureaucracy is the domination of impersonality, it operates without emotions or passion and it is exclusively affected by simple concepts related to duty. According to Weber, bureaucracy is the highest level of rationality and technical efficiency that is why bureaucratic control is so essential in controlling of individuals or things. The cause of the development of bureaucracy is the purely technical superiority of the bureaucratic organizations over any other forms (Weber, 1967). This superiority is owing to the fact that each task is carried out by specially trained bureaucrats and technocrats who constantly train themselves and increase their proficiency. Their work is driven by technicality, regulations, written form and rationality without emotions, anger and relations.

Modern capitalist companies are good examples of developed and rigid bureaucratic organizations. With the concentration of means of production, bureaucracy will constantly grow. Weber thought that the future was all about bureaucratizing, since bureaucracy is the same as predictability and objectiveness, which protect the employees and the citizens against individual and social arbitrariness.

Weber was one of the most prominent representatives of sociology but he was also involved with philosophical, political and legal issues. He was one of the classic authors who started from social sciences and then got involved with humanistic management issues. However, Weber did not approach management from the human factor side but he did it from the organizational side. He laid out his organizational theory concept in Wirtschaft und Gesellschaft (Economy and Society). Later, Weber himself called the bureaucratic organization as the house of servitude.

The soulless bureaucrats, the organization people hiding behind the rules, the files, technicality and rationality lead to Kafka's world, which is characterized by alienated and cold organizations.

2. 2.2. The theory of human relations (1920 to 1945)In the first decades of the 20th century, management and organization was entirely under the influence of scientific approach, predictability and measurement. Examination and measurement methods of rational and science origin were devised. These methods were used to perform scientific examinations, research and experiments. It was essential that these experiments should be measurable and repeatable. People working for Western Electric Company in Hawthorn, near Chicago were working in a similar frame of mind. They also carried out experiments. They started from the hypothesis that there is a ulink between the luminosity of lighting and the workers' performance (Hormans, 1967). A work group was formed and placed in a workshop. Then the experiment began. At the beginning, the results seemed to confirm the hypothesis: the higher level the luminosity was, the higher level the performance achieved. However, when the luminosity was reduced to the initial level, contradictions appeared. The workers' performance continued to grow. The results were the same after several trials. Then Elton Mayo and his colleagues from Harvard Business School were asked to take part in the experiments and to confirm the hypothesis by carrying out the experiments precisely. The first experiments gave the same results as before. By examining the circumstances of the experiments, it was found out that earlier new work groups were formed for each experiment and the experiments were performed on these new work groups.

The conclusion was that the workers' performance was affected by the group and its formation rather than the physical environment. Mayo and his colleagues carried out experiments at the company for years and recorded tens of thousands of experiment protocols. Based on these experiments, Mayo and his colleagues devised the theories and results of the “Human Relations” management school. The significance of “Human relations” was that it was the first to scientifically confirm the role of human factors in economic processes. It is not a coincidence that these results were revealed by management research since the organization and performance of processes is the field where human factors have direct influence.

“Human relations” revealed that labor performance is primarily determined by the human factors affecting group formation rather than the actual physical environment. It was cleared that the group has tremendous influence on the conduct and behavior of its members. The group affects the attitude and performance of its members.

This research became the basis of group sociology, management psychology, group research and group management. The basic unit of an organization was the group rather than the individual. An informal structure and the informal leader of the group were revealed behind the formal structure and these were considered as important factors. The performance of the workers is closely related to the level of satisfaction at the workplace:



the higher the level of satisfaction is, the better the performance is. Economic incentives are not the only means to motivate people but feelings, emotions, attitudes, beliefs and values are also important. Companies are not only technical and economic organizations but also social ones. As social systems, companies affect the individual's organizational role and form specific norms and values.

As Marosi states, the classic management trend narrowed organizations to formal organizational factors and is characterized by rationality, the domination of science-related viewpoints and the underestimation of human factors. In contrast with this, the theory of human relations shows several significant differences from the classic trend (Rubinstein, 1966). The organization of a company is made up of groups; the relations of the production process are based on the human relations of the organization members. Trust is the integrating force of the organization rather than authority. Human behavior is affected by psychological factors as well and people can be very well motivated through these factors. Management needs not only technical knowledge but they also need social skills.

The management trend, which puts humans in the center of the economic production process was developed as a result of scientific research. Thus, this was the first scientifically proven theory, which tried to clear up the human role in the economic processes. It is interesting to note that it was the imperfection of research methods of the scientific management that led to the development of human relations.

The two paradigms, the two well-separated scientific ways of thinking and views has survived in the development of management science. The development of management science after World War II is outlined through the parallel development of “objective rationalism” and “humanism”. Of course, this task cannot be carried out in full since there has been a scientific boom in the field of management since 1950. There have been so many evolving theories, trends, schools, experimental and research results, so many books, studies and articles published and so many methods, procedures and training materials devised that a full review and classification of all these would be nearly impossible. In this short summary, only those few most important theories and trends are outlined which had significantly affected the further development of management science.

3. 2.3. The trends of objective rationalismIn the years after World War II, essential changes occurred in management thinking. The origins of these changes can be traced back to wartime production management methods. The new technical and scientific results of the war period such as the computer, cybernetics and the extreme precision of measurement technology and parallel to these, the growth of productivity, automation entirely changed the way of thinking.

A new kind of quality approach developed which was also the consequence of American wartime production methods and became widespread very rapidly in Japan and Europe after the war. With the appearance of the computer, there was an opportunity to apply new information technology methods. New planning methods appeared in the economy as well, operation research, linear programming and computer modeling developed.

From the end of World War II to the 1970s, owing to the spectacular development of mathematics and technical studies, rationality, material and technical thinking came to the foreground in management science, while humanism and the human role got to the background. Management science was mostly affected by operation research methods after World War II since the secrecy of the mathematical methods developed during the war ended and these methods were applied in economic life as well. Mathematical methods like linear programming, game theory, logistic planning, network planning and calculating probability became generally and widely used procedures in the management of companies.

Systematic thinking became widespread extremely rapidly in the field of management. This approach considers the management process as a series of closely related activities which comprise a system. This approach considers the organization itself as a system which has inputs (materials, money, tools and human resources), a transformation process (technology) and outputs (products, prices and services). The trend of “social systems” was represented by Barnard who was the director of the Bell Telephone Company and later a professor at Harvard University. Barnard (1938) considered organizations as social systems and he thought that each economic organization should be considered as a sub-system of a bigger system. A company as an organization consists of further sub-systems. Sub-systems include formal groups and individuals. The main integrating factors of the sub-systems are the common goal and communication. Barnard considered communication extremely important. He thought that this means makes the coordination between the organization members possible. The primary management task is the creation and maintenance of the organization communication



system. Barnard thought that informal groups also played an important role in establishing efficient communication.

Management approaches considering and handling organizations as infinite systems straightly lead to the fact that these corporate systems can be handled with mathematical methods and automated computer procedures. Maynard thought that system organization developed those procedures and algorithms by which planning, decision-making and inspection can be handled in an automated way. The main filed where mathematical methods can be applied is decision-making. According to the theory of rational decision-making, the criteria of decision-making are constant and do not change, thus, the possible alternatives can become known and modeled, then the best alternatives can be picked. Based on this, the decision-making process can be programmed and automated. The biggest problem of the decision-making theory was uncertainty, which was caused by having insufficient information about the possible consequences of any decision. This problem was probably supposed to be resolved with some calculation methods (Maynard, 1977).

Boulding classified the systems into several cybernetic categories according to the their degree of development: (1) static structures (frameworks), (2) simple dynamic systems (clockworks), (3) cybernetic systems (thermostats), (4) open, self-maintaining structures (plants, animals and human beings considered as systems), (5) the social organization and finally (6) the transcendental systems (religions). Each level contains comprises the lower levels. Boulding (1969) held this true for both social and economic organizations. The basic unit is not the human being but the “role”. As long as the examination of the organization factors covered only the relations within the organizations, these theories were based on closed systems. Owing to the systematic approach, these theories started to consider and interpret organizations as open systems. Accordingly, a given system can always be divided into parts and these parts can be considered as further infinite systems. The entire system is more than merely the sum of the parts because it has qualities which are characteristic of the whole system. A system as a whole is separated from its environment but has interaction with it.

Systems can be placed into a bigger system, which is expressed by the hierarchy principle. A system has sub-systems which interact with one another. A system can be open or closed depending on the fact whether it is in connection with its environment or not. It is vital for open organizations to stay in touch with their environment if they want to maintain their operation. An open system has the feedback capability by which the necessary corrections can be carried out and it can differentiate and refine its structure as it grows bigger Astley–de Ven, 1983). The founders of the contingency theory thought that a manager's conduct is always determined by the given situation. The contingency or situation theory is an extension of the open system concept related to complex organizations. In contrast with the “single best solution” approach of earlier management theories, the supporters of this trend thought that a problem could have several good solutions and the selection of the most appropriate one depended on the circumstances. This theory can be outlined with Galbraith's (1973) two theorems.

• management and organization do not have a single best way and

• ways of management and organization in different situations are not equally efficient.

This theory developed based on the works of several authors (Burns – Stalker, 1961; Lawrance – Lorsch, 1969, 1967; Woodward, 1965, 1970; Thomson, 1967; Child, 1972, 1984; and Fidler, 1967). By examining organizations working in both stable and uncertain environments, these authors found that the companies operating in an uncertain environment developed structures, which represented high levels of differentiation and integration. At the same time, companies working in a stable environment had a lower level of differentiation. These results showed that environment conditions play an important role determining the appropriate organizational structures and management conduct.

It was shown that different types of organizations work in stable and uncertain environments. These were called mechanistic and organic types of organizations. Mechanistic organizations are those where labor tasks are clearly defined, well-structured and do not change. The structure is hierarchical, there are vertical communication systems. Loyalty and obedience are basic expectations. In organic organizations, the labor tasks constantly change. The performance of these tasks is more important than loyalty and obedience. Both vertical and horizontal communication channels are present. Importance and prestige are attributed to the activities toward the external environment.

There are three major lines within this theory: the technological, the grandeur and the external environment lines. The basis of differentiation is the factor affecting which determines the structure. According to this theory, the efficiency of management is related to the establishment of an organization which suits the environment



best. The decisions concerning organizational development always depend on the environmental factors, that is, they are in a conditional or contingency relation with one another. Thus, from two organizational or management solutions, the more efficient one is always the one which can adapt to the environmental circumstances better and establishes correspondence between the environment and the organizational structure (Bakacsi, 1995).

One of the organization theory trends is the institutional theory. It examines how the state affects organizations. Its starting point is that organizations are in a subordinate position with the state and its institutions. Their relation is hierarchical. The institutional environment of the organizations expects the organizations to have some kind of reasonable structure, to understand the organizations and to be able to communicate with them. The ministry of financial affairs expects the organizations to have financial departments or groups, while the labor administration can keep in touch and communicate with the labor departments or groups. Organizations try to adapt to the expectations even when their own expectations are different.

In the relation of organizations and the state, the state controls resources needed by organizations. The institutional environment rewards those organizations, which adapt to the expectations: the state prefers the more adapting organizations when it comes to acquiring resources. The state forces organizations to follow definite action and organizational structures by using both formal and indirect compelling means. The stronger the compelling force is, the more similar the organizations are to the state structure and one another (Di Maggio – Powell, 1983).

A peculiar theory of the rational trends is popular ecology. This theory adapted biological concepts, Darwin's principles of ontogeny and the survival of the species and the theory of evolutions to the operation of economic organizations. The supporters of this theory believe that only those organizations can survive which are capable of obtaining the resources needed for their existence. Since the resources are not abundant and organizations compete for them, only the fittest will prevail and the weak will perish (Freeman – Hannan, 1977).

4. 2.4. Humanistic trendsElton Mayo's career and the further development of the theory of “Human relations” were interrupted by the Great Depression in the 1930s and then by World War II. In the post-war years and decades, the role of human factors diminished due to the development of science and technology. However, humanistic trends did not vanish and their research did not stop either. Starting from the foundations of “Human relations”, behaviorist trends started to examine the role of humans in the economic processes.

The transition was MacGregor's Theory X and Theory Y. His invention starts from those basic features which were the characteristics of the classic rational school. Theory X devised by MacGregor is a motivational theory corresponding to the classic management school. This theory states that people are basically lazy. Do not want to work and they hate working. People must be forced to work, they are not creative and not imaginative at all. They are interested only in money. Thus, the style of management can only be autocracy. Control must be emphasized and strict order and discipline must be maintained. Orders must be given as commands and any failure of performing tasks must be strictly punished. Theory X bears the hypotheses and the ideology of the classic management school and it also contains empirical elements. However, MacGrefor moved from Theory X to Theory Y which corresponds to the ideas of human relations (McGregor, 1960).

According to Theory Y, money is not the only thing people can be motivated by, but they are willing to make serious physical and mental efforts to perform sensible tasks and achieve sensible goals. People do not hate labor, it is natural and desirable for them. People are capable of taking responsibilities and are basically creative and want to participate in creating things. People need community. Managers must pay close attention to the relations between people, the atmosphere of the workplace. Management must be characterized by openness, trust, continuous communication and the delegation of tasks. Eventually, MacGregor contrasted Theory Y, related to the ideology of human relations, with Theory X of the classic management school.

Kurt Lewin, a social psychologist, was a representative of the behaviorist trend. His activities were primarily significant in such areas as group dynamics, action research and the examination of behavior changes. In the group dynamics examinations initiated by him, the researchers tried to find out what individual, group and cultural factors determine a person's behavior in specific situations. Lewin (1975) regarded individuals as people whose actions were formed by internal and external forces. The momentary behavior is determined by the interaction, the changes, the size and the balance of these forces. The consistent and scientifically strict placement of individual behavior problems into a social environment revealed that the solution of management



issues is not possible without taking formal and informal groups into account. In case of individual behavior changes, Lewin thought that group and cultural norms were the most important factors. Lewin carried out similarly pioneer investigations which have kept their significance up to this day and which examined how the formal manager's managing style affected the behavior and performance of the managed group. Lewin defined and separated three different management styles: autocracy, democratic and leissez faire (liberal). This classification is the basis of the management classifications even today.

Focusing on human issues and factors can be seen clearly in the motivational management theories. These theories address the basic issue of how influence, change and control people's conduct and behavior. The question can be answered only by examining the factors affecting human factors, needs, attitudes and satisfaction in relation to corporate organizations. Maslow's hierarchy of needs is based on the assumption that there is a hierarchy of order in satisfying human needs. Maslow called the low-level needs inferior. These are only physiological and safety needs. The needs at higher levels are superior. These are knowledge-self-realization and being acknowledged. Hierarchy means that the needs at higher levels are not motivated until the ones at lower levels are satisfied. The needs that have already been satisfied are not motivated either (Maslow, 1970).

It is the managers' task to find out the level of needs their employees are at in order to find the most appropriate way of motivation. The other famous line of the motivation trend was Herzberg's two-factor or motivation hygiene theory. Herzberg examined the factors causing both satisfaction and dissatisfaction. He found that the factors responsible for dissatisfaction are labor conditions, labor safety and salaries (he called them hygiene factors). Different factors are responsible for satisfaction (he called them motivators). These factors are related to labor and tasks. These are responsibility, independence opportunities of promotion. These findings have relevant consequences in management. If the factors causing dissatisfaction are eliminated, it does not mean that positive motivation is established. Only the factors causing dissatisfaction are stopped. The chapter titled “Motivation” of “Management psychology” covers the motivational theories in detail. The theories of the motivation bring attention to the fact that human factors are complex and complicated and they can be examined by using several approaches (Herzberg, 1974).

Herbert Simon, a Nobel-prize winner Belgian scientist, was a representative of the decision theory trend of organizational behaviorism. The classic school used assumptions in case of decision-making which proved to be wrong in real life. The classic authors accepted the idea of “homo eoconomicus”, the human being who always makes the right decisions under any circumstances. Simon thought that decision-makers do not make decisions this way. In his 1982 book, Models of Bounded Rationality, stated that decision-makers either follow through the principle of seeking satisfaction in order to find optimal solutions in a more realistic world or they try to find solutions in a simplified world. The latter decision-making situation is the one, which most often occurs in practice. Simon calls the decision made this way as satisfactory decisions (Simon, 1982).

His theory is focused on the decision-making process affected by environmental and psychological factors instead of the omnipotence of cold considerations and overall calculations. The outcome of decisions is not an optimum solution resulting from objective facts but it is a result which is considered satisfactory based on the decision-maker's expectations, observations individuality and world view. Rational decision-making has limits since the decision-makers' criteria are not constant but change continuously. The decision-makers cannot be aware of all possible alternatives, they cannot see the consequences of all alternatives, thus, they cannot get to the optimal alternative but they accept the first alternative, which seems satisfactory for them.

Simon’s theory brings up the role and effect of human factors in decision-making. He started a decision theory trend which develops new decision-supporting methods and systems by modeling human thinking. On the other hand, he brought up the question of the role of human emotions, anger, attitudes, values, empathy and intuitions in economic decision-making. Simon's theory resulted in switch to an entirely new scientific paradigm.

5. References:Astley, G. A. – V. de Ven (1983): Central Perspectives and Debates in Organization Theory. Administrative Science, Quaterly.

Bakacsi Gy. – Balaton K. – Dobák M. – Máriás A.(1995): Vezetés – Szervezés. I. – II. Aula Kiadó, Budapest.

Barnard, Ch. J.(1938): Functions of the Executive. Harvard University Press.



Boulding, K. E.(1969): General Systems Theory: The Skeleton of Science. In: Rendszerelmélet. Közgazdasági és Jogi Könyvkiadó, Budapest.

Burns, T. – Stalker, G. M.(1961): The Management of Innovation. Tavistock, London.

Chandler, A. P.: The Visible Hand Cambridge University Press.

Child, J.(1972): Organization Structure, Environment and Performance: The Role of Strategic Choice, Sociology, London.

Child, J.(1984): Organization. A Guide to Problems and Practice. Second Edition. Harper and Row, London.

Di Maggio, J. – Powell, N. G.(1983): Institutional Structure. McGraw-Hill, New York.

Fayol, H.(1916): Administration industrielle et generale. Dunod, Paris.

Fiedler, F.(1967): A Theory of Leadership Effectiveness. McGraw-Hill, New York.

Freeman, J. - Hannan, M.(1977): Growth and Decline Processes in Organization. ASR. New York.

Galbraith, J. R.(1973): Designing Complex Organizations. Addison-Wesleg Reading, London.

Gilbert, F. B.1911): Motion Study. D. Van Nostrand, New York.

Herzberg, F. R.(1974): Még egyszer: hogyan ösztönözzük alkalmazottainkat? In: Üzempszichológia. Szerk.: Engländer, T. Közgazdasági és Jogi Könyvkiadó, Budapest.

Hormans, G. C.(1967): A Western Electric vállalatnál folytatott kísérletek. In.: Ember és termelékenység. Szerk.: Sutermaister, R. A. Közgazdasági és Jogi Könyvkiadó, Budapest.

Kocka J.(1969): Unternek mensverwultung und Angestelltenschaft am Beispiel, Siemens, 1847-1914. Stuttgart.

Lawrence, P. R. – Lorsch, J. W.(1967): Organization and Environment. Graduate School of Business Administration, Harward University, Boston.

Lawrence, P. R. – Lorsch, J. W.(1969): Organization and Environment. Irwin, R. D.

Lewin, K.(1975): A mezőelmélet a társadalomtudományban. Gondolat Kiadó, Budapest.

Marosi M.(1988): A szervezés és irányítás nemzetközi fejlődése, magyar gyakorlata. Közgazdasági és Jogi Könyvkiadó, Budapest.

Maslow, A. H.(1970): Motivation and Personality. Harper and Row, New York.

Maynard, H. B.(1977): Gazdasági mérnöki kézikönyv. Műszaki Kiadó, Budapest.

McGregor, D.(1960): The Human Side of Enterprise. McGraw-Hill, New York.

Rubinstein, A. H. – Habertstrok, Ch. J.(1966): Some Theories of Organization. Irwin–Dorsey.

Simon, H. A.(1982): Korlátozott racionalitás. Közgazdasági és Jogi Könyvkiadó, Budapest.

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Taylor, F. W.(1911): The Principles of Scientific Management. New York.

Taylor, F. W.(1983): Üzemvezetés. A tudományos vezetés alapjai. Közgazdasági és Jogi Könyvkiadó, Budapest.

Thompson, J. D.(1967): Organizations in Action. McGraw-Hill, New York.

Troitzsch, U.(1977): Innovation und Wissenschaft beim Aufbuu von Hüttenwerkwn im Ruhregbiet, 1850-1870, Dortmund.

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Woodward, J.(1965): Industrial Organization. Theory and Practice. University Press, London.

Woodward, J.(1970): Industrial Organization: Behaviour and Control. University Press, London.


3. fejezet - 3. The concept and understanding of an organizationLiterature abounds with definitions and explanations of what an organization should be. Some researchers into human organization are goal-oriented, focusing on the activities and outcomes of groupings of individuals. Klein (2001), for example, writes that an organization should be understood as several individuals in a purposefullycoordinated system of actions. Schein (1978) looks rather at how human organizations function as the arrangers and managers of activities, arguing that an organization only manages the undertakings of several individuals and assigns tasks or activitiesin order to implement a shared, openlyproclaimedpurpose or goal, when so ordered or on the basis of a chain of command. Others prefer to view organizations as means of handling change within groups, arguing that organizational relations consist of changing tension balances between interdependence and autonomy, between steering and self-organization. This concept not only applies to organizational change, but also to change management. It provides insights, which guide decisions in matters of organizational design and organizational culture. (Summarized from Mastenbroek, 1991, 1993)Finally, there is the view of the organization as identifier and facilitator, without which no concerted human activity would be possible. As only one example, organizational, social and economic processes ensure the conditions (human, machine, infrastructure, etc.) and frames (legal, monetary) for their utilizationif incorporated into a consciously constructed system (communicational, informational, power structural, etc.). Regardless of one’s focus in interpreting the meaning of what an organization is and why it exists, in the business world at least, an organization remains the unit we know as a company, i.e. a product producing or service providing organization or even an amalgam of both.

Several theories explain an organization and its structure. Classical organization theory includes the scientific management approach, Weber's bureaucratic approach, and administrative theory. The scientific management approach is based on the concept of planning of work to achieve efficiency, standardization, specialization and simplification. The approach to increased productivity is through mutual trust between management and workers. Taylor (1947) proposed four principles of scientific management: science, not rule-of-thumb; scientific selection of the worker; management and labor cooperation rather than conflict; and the scientific training of workers.

Weber's bureaucratic approach considers the organization as a part of broader society. The organization is based on the principles of: structure; specialization; predictability and stability; rationality; and democracy. Weber's bureaucratic approach is today often considered rigid, impersonal, self-perpetuating and empire building.

Administrative theory was propounded by Henry Fayol and is based on several principles of management. In addition, management was considered as a set of planning, organizing, training, commanding and coordinating functions. Neoclassical theory emphasizes individual or group behavior and human relations in determining productivity. The main features of the neoclassical approach are individual, work group and participatory management.

A modern approach to organization characteristics is based on the concept that any organization is an adaptive system which has to adjust to changes in its environment. Modern theories include the systems approach, the socio-technical approach, and the contingency or situational approach. The systems approach considers the organization as a system composed of a set of inter-related - and thus mutually dependent - sub-systems. Thus, the organization consists of components, ulinking processes and goals. The socio-technical approach considers the organization as composed of a social system, technical system and its environment. These interact among themselves and it is necessary to balance them appropriately for effective functioning of the organization. The contingency or situational approach recognizes that organizational systems are inter-related with their environment and that different environments require different organizational relationships for effective working of the organization.

A social organization is characterized by complexity, degrees of inter-dependence between sub-systems, openness, balance and multiplicity of purposes, functions and objectives. Why should goals be set? Goals are set to increase performance and provide control. How are goals set? Following management by objectives, the process of goal setting involves five steps. First, the overall objectives of the organization are set and then an action plan is evolved. The second step is to prepare members in the organization for successful implementation of the action plan. Individual goals are set in the third step. Periodic appraisal and feedback is the fourth step, to


3. The concept and understanding of an organization

ensure smooth implementation of the action plan. Finally, an appraisal of performance by results takes place.

The concept of integration and coordination in the organization is based on controlling mechanisms for the smooth functioning of an organization. Organizational differentiation is the unbundling and re-arranging of the activities. Integration is re-grouping and re-ulinking them. The need for integration arises in the face of environmental complexity, diversity and change. Yet, how is integration actually achieved? Obviously, the structure of an organization should facilitate proper coordination and integration of different specialized units. If an organizational structure is not proper, then problems affecting operations result. Integration is achieved through vertical coordination along the hierarchy, decision-making levels, and span of control. There are several methods to improve integration. These include rules, procedures and professional training.

Within any organization, there is also the concept of power, which is ulinked to decision-making and communication. Power refers to the ability to get an individual or group to do something or to change in some way. Power could emanate from position, economic status, knowledge, performance and personality, physical or ideological traits. Power is one of the strongest motives, and affects setting of objectives and availability of resources in an organization.

Communication is another important process in the organization and is a key mechanism for achieving integration and coordination of the activities of specialized units at different levels in the organization. Communication can be horizontal, downward or upward. Communication, from a management point of view, involves the relaying of decisions within an organization, to those who are to implement those decisions. In the other direction, communication may be used by employees to inform the management about the results, consequences or even problems with a made decision. In any case, decision-making begins with goal setting, identification and evaluation of alternatives and the choice of criteria. How decisions are communicated and implemented depends on the nature of the organization in which they are made and on which the decision is acted. This brings us to the question of organizational theory.

Organizational theories explain organizations and their structure, and may be generally classified as being classical or modern.

1. 3.1. Classical organization theoryClassical organization theories (Taylor, 1947; Weber, 1947; Fayol, 1949) deal with the formal organization and concepts to increase management efficiency. Taylor presented scientific management concepts, Weber gave the bureaucratic approach, and Fayol developed the administrative theory of the organization. They all contributed significantly to the development of classical organization theory.

The scientific management approach developed by Taylor is based on the concept of planning of work to achieve efficiency, standardization, specialization and simplification. Acknowledging that the approach to increased productivity was through mutual trust between management and workers, Taylor suggested that, to increase this level of trust, the advantages of productivity improvement should go to workers, physical stress and anxiety should be eliminated as much as possible, capabilities of workers should be developed through training, and the traditional 'boss' concept should be eliminated.

Taylor developed the following four principles of scientific management for improving productivity:

• Science, not rule-of-thumb: Old rules-of-thumb should be supplanted by a scientific approach to each element of a person's work.

• Scientific selection of the worker: Organizational members should be selected based on some analysis, and then trained, taught and developed.

• Management and labor cooperation: rather than conflict Management should collaborate with all organizational members so that all work can be done in conformity with the scientific principles developed.

• Scientific training of the worker: Workers should be trained by experts, using scientific methods.

Considering the organization as a segment of broader society, Weber (1947) based the concept of the formal organization on the following principles:

• Structure: In the organization, positions should be arranged in a hierarchy, each with a particular, established



amount of responsibility and authority.

• Specialization: Tasks should be distinguished on a functional basis, and then separated according to specialization, each having a separate chain of command.

• Predictability and stability: The organization should operate according to a system of procedures consisting of formal rules and regulations.

• Rationality: Recruitment and selection of personnel should be impartial.

• Democracy: Responsibility and authority should be recognized by designations and not by persons.

Later, management science research found Weber's theory to be problematic, on account of several dysfunctions (Hicks - Gullett, 1975), such as rigidity, impersonality, displacement of objectives, limitation of categorization, self-perpetuation and empire building, cost of controls, and anxiety to improve status.

The elements of administrative theory (Fayol, 1949) relate to accomplishment of tasks, and include principles of management, the concept of line and staff, committees and functions of management.

• Division of work or specialization: This increases productivity in both technical and managerial work.

• Authority and responsibility: These are imperative for an organizational member to accomplish the organizational objectives.

• Discipline: Members of the organization should honor the objectives of the organization. They should also comply with the rules and regulations of the organization.

• Unity of command: This means taking orders from and being responsible to only one superior.

• Unity of direction: Members of the organization should jointly work toward the same goals.

• Subordination of individual interest to general interest: The interest of the organization should not become subservient to individual interests or the interest of a group of employees.

• Remuneration of personnel: This can be based on diverse factors such as time, job, piece rates and bonuses, profit-sharing or non-financial rewards.

• Centralization: Management should use an appropriate blend of both centralization and de-centralization of authority and decision making.

• Scalar chain: If two members who are on the same level of hierarchy have to work together to accomplish a project, they need not follow the hierarchy level, but can interact with each other on a 'gang plank' if acceptable to the higher officials.

• Order: The organization has a place for everything and everyone who ought to be so engaged.

• Equity: Fairness, justice and equity should prevail in the organization.

• Stability of tenure of personnel: Job security improves performance. An employee requires some time to get used to new work and do it well.

• Initiative: This should be encouraged and stimulated.

• Esprit de corps: Pride, allegiance and a sense of belonging are essential for good performance. Union is strength.

• The concept of line and staff: The concept of line and staff is relevant in organizations which are large and require specialization of skill to achieve organizational goals. Line personnel are those who work directly to achieve organizational goals. Staff personnel include those whose basic function is to support and help line personnel.

• Committees: Committees are part of the organization. Members from the same or different hierarchical levels from different departments can form committees around a common goal. They can be given different



functions, such as managerial, decision making, recommending or policy formulation. Committees can take diverse forms, such as boards, commissions, task groups or ad hoc committees. Committees can be further divided according to their functions. In agricultural research organizations, committees are formed for research, staff evaluation or even allocation of land for experiments.

• Functions of management: Fayol (1949) considered management as a set of planning, organizing, training, commanding and coordinating functions. Gulick - Urwick (1937) also considered organization in terms of management functions such as planning, organizing, staffing, directing, coordinating, reporting and budgeting.

Neoclassical theory

Neoclassical theorists recognized the importance of individual or group behavior and emphasized human relations. Based on the Hawthorne experiments, the neoclassical approach emphasized social or human relationships among the operators, researchers and supervisors (Roethlisberger - Dickson, 1943). It was argued that these considerations were more consequential in determining productivity than mere changes in working conditions. Productivity increases were achieved as a result of high morale, which was influenced by the amount of individual, personal and intimate attention workers received.

2. 3.2. Principles of the neoclassical approachThe classical approach stressed the formal organization. It was mechanistic and ignored major aspects of human nature. In contrast, the neoclassical approach introduced an informal organization structure and emphasized the following principles:

• The individual: An individual is not a mechanical tool but a distinct social being, with aspirations beyond mere fulfillment of a few economic and security works. Individuals differ from each other in pursuing these desires. Thus, an individual should be recognized as interacting with social and economic factors.

• The work group: The neoclassical approach highlighted the social facets of work groups or informal organizations that operate within a formal organization. The concept of 'group' and its synergistic benefits were considered important.

• Participative management: Participative management or decision-making permits workers to participate in the decision making process. This was a new form of management to ensure increases in productivity.

Modern theories

Modern theories tend to be based on the concept that the organization is a system, which has to adapt to changes in its environment. In modern theory, an organization is defined as a designed and structured process in which individuals interact for objectives (Hicks - Gullet, 1975). The contemporary approach to the organization is multidisciplinary, as many scientists from different fields have contributed to its development, emphasizing the dynamic nature of communication and importance of integration of individual and organizational interests. These were subsequently re-emphasized by Bernard (1938) who gave the first modern and comprehensive view of management. Subsequently, conclusions on systems control gave insight into application of cybernetics. The operation research approach was suggested in 1940. It utilized the contributions of several disciplines in problem solving. Von Bertalanffy (1951) made a significant contribution by suggesting a component of general systems theory which is accepted as a basic premise of modern theory.

Some of the notable characteristics of the modern approaches to the organization are:

a systems viewpoint, a dynamic process of interaction, multileveled and multi-dimensional, multi-motivated, probabilistic, multidisciplinary, descriptive, multivariable and adaptive.

Modern understandings of an organization can be broadly classified into: the systems approach, socio-technical theory, and a contingency or situational approach.

The systems approach

The systems approach views organization as a system composed of interconnected - and thus mutually dependent - subsystems. These subsystems can have their own sub-subsystems. A system can be perceived as



composed of some components, functions and processes (Albrecht, 1983). Thus, the organization consists of the following three basic elements (Bakke, 1959):

i. Components: There are five basic, interdependent parts of the organizing system, namely:

the individual, the formal and informal organization, patterns of behavior emerging from role demands of the organization, role comprehension of the individual, and the physical environment in which individuals work.

ii. ulinking processes: The different components of an organization are required to operate in an organized and correlated manner. The interaction between them is contingent upon the ulinking processes, which consist of communication, balance and decision-making.

• Communication: is a means for eliciting action, exerting control and effecting coordination to ulink decision centers in the system in a composite form.

• Balance: is the equilibrium between different parts of the system so that they keep a harmoniously structured relationship with one another.

• Decision analysis: is also considered to be a ulinking process in the systems approach. Decisions may be to produce or participate in the system. Decision to produce depends upon the attitude of the individual and the demands of the organization. Decision to participate refers to the individual's decisions to engross themselves in the organization process. That depends on what they get and what they are expected to do in participative decision-making.

iii.Goals of organization: The goals of an organization may be growth, stability and interaction. Interaction implies how best the members of an organization can interact with one another to their mutual advantage.

Socio-technical approach

It is not just job enlargement and enrichment, which is important, but also transforming technology into a meaningful tool in the hands of the users. The socio-technical systems approach is based on the premise that every organization consists of the people, the technical system and the environment (Pasmore, 1988). People (the social system) use tools, techniques and knowledge (the technical system) to produce goods or services valued by consumers or users (who are part of the organization's external environment). Therefore, equilibrium among the social system, the technical system and the environment is necessary to make the organization more effective.

3. 3.3. The contingency or situational approachThe situational approach (Selznick, 1949; Burns - Stalker, 1961; Woodward, 1965; Lawrence - Lorsch, 1967) is based on the belief that there cannot be universal guidelines, which are suitable for all situations. Organizational systems are inter-related with the environment. The contingency approach (Hellriegel and Slocum, 1973) suggests that different environments require different organizational relationships for optimum effectiveness, taking into consideration various social, legal, political, technical and economic factors.

4. ReferencesAlbrecht, K.(1983): New systems view of the organization. pp. 44-59, in: Organization Development. Englewood Cliffs, NJ: Prentice-Hall.

Anderson, C.R.(1988):Management: Skills, Functions and Organization Performance. New York, NY: Allyn and Bacon.

Bakke, W.E.(1959): Concept of social organization. pp. 16-75, in: Haire, M. (ed), Modern Organization Theory, New York, NY: John Wiley.

Barkdull, C.W.(1963): Span of Control: A method of evaluation. Michigan Business Review, 15(3).

Bernard, C.(1938):The Functions of the Executive. Cambridge, MA: Harvard University Press. Burns, T.G., - Stalker, G.M.(1961):The Management of Innovation. London: Tavistock Institute.



David, S.M., - Lawrence, P.R.(1978): Problems of matrix organizations. Harvard Business Review, May-June: 131-142.

Drucker, P.F.(1954):The Practice of Management. New York, NY: Harper.

Fayol, H.(1949):General and Industrial Management, translated by Constance Storrs. London: Pitman.

French, J.R.P., Jr., - Raven, B.(1959): The bases of social power. pp. 156-165, in: Cartwright, D. (ed), Studies in Social Power. Ann Arbor, MI: University of Michigan.

Galbraith, J.K.(1956):American Capitalism: The Concept of Countervailing Power. Boston, MA: Houghton Mifflin.

Gortner, H.F. - Mahler, J. - Nicholson, J.B.(1987):Organization Theory. Reading, MA: Dorsey Press. See pages 244-266.

Gulick, L. - Urwick, L. (eds)(1937):Papers on the Science of Administration. New York, NY: Institute of Public Administration.

Hellriegel, D. - Slocum J.W.(1973): Organization theory: a contingency approach. Business Horizons, April, 1973.

Hicks, G.H. - Gullet, C.R.(1975):Organizations: Theory and Behaviour. New York, NY: McGraw-Hill.

Huse, E.F. - Bowditch, J.L.(1973):Behaviour in Organizations. The Philippines: Addison-Wesley.

Katz, D. - Kahn, R.(1978):The Social Psychology of Organizations. New York, NY: John Wiley.

Latham, G.P. et. al.,(1981): Goal setting and task performance: 1969-80. Psychological Bulletin, July.

Lawrence, P.R. - Lorsch, J.W.(1967): Differentiation and integration in complex organizations. Administrative Science Quarterly, June.

Locke, E.A.(1968): Toward a theory of task motivation and incentives. Organizational Behaviour and Human Performance, May.

Luthans, F.(1985):Organizational Behaviour. Singapore: McGraw-Hill.

Milgram, S.(1974):Obedience to Authority. New York, NY: Harper & Row.

Pasmore, W.A.(1988):Designing Effective Organizations, New York, NY: John Wiley.

Roethlisberger, F.J. - Dickson, J.W.(1943):Management and the Worker. Cambridge, MA: Harvard University Press.

Seiznick, P.(1949):TVA and the Grass Roots. Berkeley, CA: University of California Press.

Shannon, C.E. - Weaver, W.(1949):The Mathematical Theory of Communication. Urbana, IL: University of Illinois Press.

Sherwin, D.S.(1976): Management of objectives. Harvard Business Review, May-June.

Taylor, F.W.(1947):Principles of Scientific Management. New York, NY: Harper.

Tosi, H.L. - Rizzo, J.R. - Carroll, S.(1986):Managing Organizational Behaviour. New York, NY: Pitman.

Von Bertalanffy, L.(1951): General systems theory: a new approach to the unit of science. Human Biology, December.

Weber, M.(1947):The Theory of Social and Economic Organization. Translated by Talcott Parsons. New York, NY: Free Press.

Woodward, J.(1965):Industrial Organization. Oxford: Oxford University Press.


4. fejezet - 4. Structural characteristics of organizational formsAn organization is a general category which comprises production companies, healthcare and educational institutions and service providers as well as all those organizations which have specific and well-marked characteristics.

What should the structure of an organization be like? Is it good if all organizations are uniform? It would be easy for the leaders if the structure and the operation of all organizations were the same in all aspects. Thus, organizations would become recognizable, predictable and constant. Plato's mechanical paradigm envisions the world based on the operation of a machine, which always obeys rational, simple and eternal laws (Levie, 1993). In contrast with this, the organic paradigm considers the world similar to the human body, which allows non-rational behavior as well. This latter approach interprets man-made organizations differently from the former one. Organizations survive as long as they can react to the stimuli of the environment, can adapt to the changes of the environment and can acquire those resources from the environment, which are necessary for their survival. These evolution systems ensure their survival making decisions and via continuous communication with their environment (Baracskai, 1988). Barnard defines an organization as a system of two or more people's intentionally coordinated activities or efforts (Barnard, 1948).

Of course, several issues come up regarding organizations, such as division of labor, powers and responsibility, organizational scheme, the regulated state of discipline relationships and the forming of group structures. Organizations are complex systems and can be characterized and described with multiple factors.

4.1. ábra - Figure 1.: Classification of organizations by scale (based on Dobák, 1997)

The structural features are criteria which can be used to describe and demonstrate the structure of an organization. Dobák writes about four different structural features: division of labor, division of powers, coordination and configuration (Bakacsi et. all., 1988). In contrast with that, Kelly and Grimes denote the following internal structural features: structural scheme, regulation of powers and responsibilities, delegation, hierarchical relationships and decentralization. Besides all these features, when demonstrating organizational forms, one can also often encounter the issue of discipline relationships as an aspect of structural evaluation as well (Kelly – Grimes, 1993).

An organizational scheme is a figure or a line diagram, which displays the division of powers, the hierarchical relationships, the system and levels of hierarchy and the division of labor within an organization (Figure 2.).

4.2. ábra - Figure 2.: One dimension structure(based on Dobák, 1997)


4. Structural characteristics of organizational forms

The scheme also denotes the managerial functions and it also makes the group structure of the organization deductible. The organizational scheme also allows the members of the organization to see and understand the position and the role of each individual and unit within the company structure. They can see how each unit is connected to other units. The scheme also describes the official communication and information lines and routes and how the organization can be expanded in its breadth and depth. Of course, this scheme, which is often called a configuration, is a secondary structural feature since its function is to describe and formally display the structure, which has already been formed along different principles.

An organizational scheme is the result of a long-lasting development process. Division of labor or specialization is one of the most basic organization-forming factors. Even the simplest organizations have division of labor in some form or at some level. Division of labor divides the activities of an organization into well-defined partial activities or tasks and the different organizational units, groups and divisions are established to perform these tasks as efficiently as possible. Samuelson thinks that specialization is nothing else but acquiring and performing the knowledge, skills or a definite section of the activities. Samuelson thinks that the greatest economic success can be achieved when everybody utilizes their most valuable knowledge and everybody does what they are the best at (Samuelson, 1988). Torgersen thinks division of labor helps the increase of productivity in different ways. The simpler, well-structured and repetitive tasks improve the performance and the results by themselves. Training specialists is simpler and takes shorter time, the professional skills of a narrower field are easier to master and the training costs are lower as well. Also, auditing is simpler and the specific tools can be utilized more intensively (Torgerson, 1979).

How far can one go regarding division of labor? What restricting or negative effects limit the specialization? (Figure 3.)

4.3. ábra - Figure 3.: Labor division – one dimensional organization (own figure)

Substitutability, monotony boredom and coordination difficulties should be mentioned as effects which limit exuberant organizational specialization. The substitutability of specialists is more difficult in a prosperous period since their knowledge is limited to a narrow field. The stronger the division of labor within an organization and the narrower the field the members of the organization must be specialized in, the more difficult their substitutability is. In many cases, organizations have to train their own specialists since the specialists with general skills are not suitable for these specific tasks any more (Figure 4).



4.4. ábra - Figure 4.: Division of labor-two dimensional organization (based on Dobák, 1997)

The tasks given to organizational units or members are smaller, more specific and simpler activities which require a narrower field of knowledge, less independence, less problem-solving and creativity (Berki – Berde, 1999).

Coordination is a structural factor parallel to organizational division of labor. The more diverse an organization is due to division of labor, the more important is the role of coordinating the activities of each organizational unit. That is, the structure resulting from the division of labor can only work through the coordination of the connected specialized units. Beyond a certain point, the coordination costs may increase faster than the savings coming from specialization. Any exuberant specialization within an organization is restricted by the efficiency of the operation (Figure 5.).

4.5. ábra - Figure 5.: Vertical coordination (based on Dobák, 1997)

The hierarchy of decision-making powers should also be determined within an organization (Figure 6.).

4.6. ábra - Figure 6.: Horizontal coordination (based on Dobák, 1997)



The hierarchical relationships actually determine the powers of giving orders and requiring accounts. Hierarchy is developed along the principle that the process of connecting powers must be ensured within the entire organization. The person or unit at a lower level of the hierarchy has the obligation of giving account to their superiors. Thus, the communication and information channels become strongly formal. Since no connection points are omitted, all the managers at the different levels will obtain information. The principle of hierarchy remonstrates the lines of the organizational structure must not be stepped over or the formal hierarchy must not be violated in any other manner. The clearer these determinations are, the more stable the structure is. Of course, a structure with the stability of powers is hard-and-fast at the same time. Powers are closely related to liabilities which can be interpreted as obligations to perform certain duties and to carry out certain activities and tasks. Liabilities also mean that if a given person or unit is responsible for performing a certain task, they can be held accountable for achieving a given goal.

4.7. ábra - Figure 7.: Multi line organization (based on Dobák, 1997)

Delegation is an issue which is closely related to powers and liabilities. It means that a manager at a certain level within the organization delegates the tasks within their powers to people at a lower level of hierarchy. Earlier, delegation primarily meant the transfer of tasks and powers. One can often encounter viewpoints which hold that only tasks can be delegated but liabilities cannot. Carlzon speaks about the decentralization of liabilities when he puts that a manager should thoroughly size up the medium surrounding the company, draw up the strategy of the firm and then persuade the employees of their vision but the performance of the tasks should be decentralized. Based on the principle of delegated liabilities, the employees must have the opportunity to show their abilities, to act and decide independently (Carlson, 1968).

Nowadays, more and more management methods and theories emphasizing the decentralization of liabilities are



being outlined. Blanchard and his colleagues talk about the power of liabilities and they say that empowerment means the delegation of decision-making rights and the related liabilities. They outline the steps of empowerment as follows: establishing the free flow of information, autonomy, creation by determining the limits of autonomy and establishing self-governing teams instead of hierarchical decisions (Blanchard et. all., 1998).

Determining the powers means determining the number of employees who directly give accounts to a given manager. It is generally acceptable that a manager is capable of controlling a great number of employees, which means the establishment of “flatter” organizational structures. Thus, the number of levels in the hierarchy can be reduced and the organizations are controlled by fewer managers. This tendency can be recognized in the present leadership practices.

Subordination relationships are also closely related to powers. In case of single-line, linear structures, the subordination relationships are the same as powers. Subordination relationships are such managerial tasks, which include the judgment and evaluation of the employees' work, performance, conduct and behavior. Powers can determine the scope of those individuals or units whose activities and performance a manager is entitled to judge. However, subordination relationships do not only mean judgment competencies but they also mean the related motivational (rewards and awards), controlling and personnel (hiring and laying off) tasks as well.

In function-type organizations, the powers are function-based and the hierarchical relationships are not clearly defined. The subordination relationships must be defined separately in the function-type as well as in the matrix-type organizations. The theory and system of functional management as an alternative to the idea of one-person leadership was devised by Taylor. One-person leadership is one of the basic principles of the management theory (Taylor, 1911). This principle states that one person is held accountable for only one manager and can receive orders only from one manager. Thus, the powers, the hierarchical and subordination relationships are clearly defined. This ensures that the powers within an organization cannot be mixed up. It is clear for everyone who their superior is and they do not happen to receive orders from more superiors at the same time. Taylor could not completely get rid of one-person leadership in functional structures either, the subordination relationships had to be defined in his functional organizations as well (Dobák, 1997). The situation might be much more complex in a matrix-type organization where the same person can be the member of a project team and a production unit or group at the same time. This individual may be held accountable for two or more superiors at the same time. In such cases, the subordination relationships must be regulated separately.

1. References:Bakacsi Gy. – Balaton K. – Dobák M. – Máriás A.(1995): Vezetés – Szervezés. I–II., Aula Kiadó, Budapest.

Baracskai Z. – Berki S. – Döfler V. - Velenczei J. – Zombori J.(1988): Vezetés. Doctus Kiadó, Nyíregyháza.

Barnard, Ch. J.(1948): Organization and Management. Harward University Press, Cambridge.

Berki S. – Berde Cs.(1999): - mondta a csiga és ..., Humánpolitikai Szemle, 7-8. szám, 1999.

Blanchard, K. – Carlos, J. P. – Randelph, A.(1998): Empowerment. A felelősség hatalma. SHL Hungary Kft., Budapest.

Carlson, J.(1968): Lapítsd a piramist. Közgazdasági és Jogi Könyvkiadó, Budapest.

Dobák M.(1997): Szervezeti formák és Vezetés. Közgazdasági és Jogi Könyvkiadó, Budapest.

Kelly, A. – Grimes, T.(1993): A menedzsment elvei. Acca Hungaria Kft., Budapest.

Levie, J.(1993): Paradigmák a vezetéstudományban. Vezetéstudomány 1-2. sz. Budapest, 1993.

Samuelson, P. A.(1988): Közgazdaságtan I. Közgazdaságtani és Jogi Kiadó, Budapest.

Taylor, F. W.(1911): The Principles of Scientific Management. New York.

Torgersen, P. E. – Weinstock, I. T.(1979): Vezetés integrált felfogásban. Közgazdasági és Jogi Kiadó, Budapest.


5. fejezet - 5. Economic classification of organizationsThere are several classifications and different types for organizational forms in management literature. Dobák provides a most comprehensive classifications and summary of organizational forms. He divides organizations into four basic types, such as linear, functional, divisional and matrix (Dobák, 1997). A linear organization is defined as a classic example of the single-line type of organization (Figure 1.).

5.1. ábra - Figure 1.: Linear (Line) organization(own figure)

In fact, it is the same as Torgersen's line structure. The author states that in this type of an organization each employee may receive orders only from one person. The manager is responsible for all the activities of the unit and the subordination and professional relationships are not separated. The assignment of tasks and the orders given toward the employees and the accounts toward the superiors go along the same route. The advantage of this type of organization is that it is simple and clearly visible. It is easy to establish the units of the organization in its breadth and depth. The operation of vertical communication and information lines is especially successful. However, the horizontal coordination between units at the lower levels of hierarchy is rather awkward. The missing specialization increases the burdens of the top level managers. Due to the exuberant regulation, this type of organization is inflexible and hardly adapts to the changes of the environment (Figure 2.).

5.2. ábra - Figure 2.: Functional organization (own figure)

The author mentions functional organizations as characteristic examples of the multiple- line type. In these organizations, each employee has several superiors. Organizational units are established to carry out specific tasks (functions),division of labor is based on functional principles. This type of organization can be successful in a stable environment and with a relatively clear and not too complex product structure and activities. The decision-making powers are concentrated in the hands of the functional managers. As a result of specialization, managers are responsible only for given tasks, often in several units. Subordination relationships are not defined


5. Economic classification of organizations

by a specific structure, these should be regulated separately. The regulation of the subordination relationships is linear, which gives line-type elements to the functional structure. Thus, purely functional organizations do not exist; they are rather linear-functional structures.

5.3. ábra - Figure 3: Divisional organization (based on Dobák, 1997)

Chandler was the first to give a definition of divisional organizations in management literature (Chandler, 1977). He calls divisional organizations “multi-divisional” (Figure 3.). He assumes that these types of organizations are structures consisting of independent divisions. These organizations, to some extent, are built up of units carrying out given activities and tasks. The classification of the divisions depends on the extent of the organization's independence. The divisions at the lowest level are only independent regarding cost management and cost utilization. “Profit centers” have independence in producing and utilizing income as well, while “investment centers” are independent regarding investments and developments. The independence of divisions have several areas and degrees. Sometimes even legal independence can occur but there is always dependence regarding assets. Divisions should be established in cases of diversified activities, i.e.if there is a wide range of products and the structure of products is heterogeneous. Of course, it is reasonable to establish an independent organization for a given product family or a line only if the volume is appropriate. This structure can be regarded as a linear one; the independent divisions are coordinated and controlled from a single division center. The center division structuring can lead to the establishment or development of parallel functions as well. In spite of this, the operative and strategic tasks are clearly separated since the operative tasks belong to the divisions and the strategic tasks belong to the center. In case of the divisions, the market effects are powerful and the divisions are often created on the market basis. Market conduct is characterized by compartmentalization, which means that the positive or negative market consequences concern only the activities and success of the given branch or product division. It derives from the independence of the divisions that they want to become more independent and they want more powerful lobbying capabilities (Mintzberg, 1979).

In case of the traditional structures, like the linear and the functional ones, structures crossing the vertical “lines” squarely had to be created within the organizations in order to make the horizontal coordination more efficient. These horizontally created formations, which cross the vertical structure, can be projects or product groups (see figure). Such formations are called matrix organizations (Figure 4.).

5.4. ábra - Figure 4.: A matrix organization (own figure)


5. Economic classification of organizations

In the matrix structure people are assigned to definite projects or tasks. At the same time, these people are still held accountable to their original functional or production units. Thus, control is functional and material at the same time. This type of organization is two-dimensional and decision-making is decentralized, it is shared between two dimensions. Control is based on a multiple-line principle, the regulation and determination of tasks and powers are at a lower level, that is, the organization is less formalized. Owing to this fact, the organization is more flexible and can adapt to the changes of the environment much easier. Such a structure should be created in a changing or heterogeneous environment or in case of tasks involving much novelty or risk (Bennis – Schein, 1965). Since the horizontal formations can be created in traditional structures as well, matrix organizations can be established within the traditional forms too. Thus, matrix organizations are suitable to make the traditional forms dynamic. The matrix structure can be very innovative and adaptive but requires a completely new management culture, style and perspective. This structure may be characterized by the rivalry of two management dimensions, decision-making, conflict avoidance and staying away from raking responsibility. In this type of organizations, the role of teams increases, over-dimensional and over-extended teamwork can appear. Since the organization is less formalized, the structure can become unstable, especially in crisis situations, and eventually it might very well collapse. What is emphasized as an advantage of this type can very easily become a disadvantage.

1. References:Dobák M.(1997): Szervezeti formák és Vezetés. Közgazdasági és Jogi Könyvkiadó, Budapest.

Chandler, A. P.(1977): The Visible Hand. Cambridge Universití Press, London.

Mintzberg, H.(1979): The Structuring of Organizations. Englewood Cliffs, Prentice-Hall, N. J.

Bennis, K. E. – Schein, E. H.(1965): Coming to a New Organizational Culture. Sloan Management Review.


6. fejezet - 6. Classifications of Organizations by Mintzberg: How to Understand the Structure of an OrganizationModern managers have learned that traditional hierarchy is not always the most effective structure. Whether one examines the examples of Microsoft, Apple or Generali Insurance, many of the giants of industry and enterprise are finding themselves evolving to remain on top of the current global economic crisis. While financial services providers function with tight procedures and meticulous control systems, the employees of design agencies, on the other hand, give the impression of operating as free agents. Large organizations amalgamate to achieve "synergies", but they sometimes also split divisions out into separate, more agile companies. Regardless of where we look, organizational structures are constantly in flux and management has to decide which is the next structural format in the evolutionary process which will most likely bring success, both within the organization and in its daily operations vis-à-vis partners, suppliers, authorities and, of course, its customers.

Why do organizations differ so greatly in structure? The variety seen in today’s business world stems from the impact an organization's structure can make on the way it performs. Indeed, why is it that some companies achieve success through strict controls and systems, while other companies that try to duplicate that structure may suffer terrible results? Why does a start-up company have to evolve its structure over time as it grows, and as its strategy and its environment changes?

This is because successful organizations are those that have devised – often through short-term failure - the best way to integrate and organize key internal and external elements. Thriving businesses realize the importance of evaluating and redesigning their hierarchies and operations continuously. Yet, with so many factors and combinations, how does management determine the best structure for its company at any given time? Distinguished management theorist Henry Mintzberg asserts that an organization's structure emerges from the interplay of the organization's strategy, the environmental forces it experiences, and the organizational structure itself. When these elements fit together well, they combine to create organizations that can perform well. When they fail to fit – or are simply incongruous by nature - then an organization is prone to suffering with severe problems which will necessarily have negative impacts on its operations and success.

Mintzberg devised his organizational types by investigating those traits which are common between companies structured similarly and what conditions led to those companies being formed they way they were. He noted how different structures arise from the different characteristics of these organizations and from the different forces that shape them (which Mintzberg calls the "basic pulls" on an organization). By understanding the organizational types that Mintzberg defines, one can think about whether a company's structure is well suited to its conditions. If not, management simply must begin to think about what is required to change things for the better.

One focus of his interrogation in how to best improve management within a structure is the coordination of communication flow. Direct supervision is, of course, the condition when one person gives direct orders to others. Within a single office or team, this type of communication is possible and was, of course, historically the most common such coordination prior to the modern age of email and the cellular telephone. Small businesses still employ direct supervision and some sectors, in which for example product and/or employee safety is a key requirement, simply must use it to avoid misunderstandings, which could result in severe consequences.

However, as an organization grows in number of buildings, sites and employees, the need for a standardization of work processes grows in importance. Franchises and product manufacturers are the most visible types of organization in which such standardization is unavoidable. Whether one considers aircraft or automobile production, that of computer or telecommunications hardware or franchises like McDonald’s, the fact remains that without standardization in work processes, such organizations simply could not be run with any efficiency or effectiveness. Time, money and quality would all be lost in the chaos, which non-standardized work processes would generate. If one manager or management team designs the general work procedures governing how an employee or a set of employees must deal with and complete a single job or a set of tasks, then


6. Classifications of Organizations by Mintzberg: How to Understand the Structure of an Organization

management ensures that these tasks are not only all coordinated. More importantly, in this case, management has gained an invaluable tool in predicting and establishing targets on production quotas, sales and revenues, all weighed against costs. McDonald’s managers have a complete understanding of what kinds of costs precede the preparation, cooking and assembly of a standard cheeseburger, their cost breakdowns and total. This information is used, together with other data, to calculate the best price for attracting the maximum possible amount of customers for that item. Employees are painstakingly trained to ensure that work processes and preparation time expectations are consistently met for each and every standard item and these expectations, weighed against sales figures, allow a McDonald’s manager to determine the number of employees required per shift/per day, to ensure a proper work flow for customer satisfaction, balanced with the need to meet hourly and daily profit expectations. (Kowitt, 2011)

Companies, such as seen in the example of McDonald’s above, also use a standardization of output, another of Mintzberg’s considerations for managing communication for effective organizational operations. In this type of standardization, one person specifies the general outputs of the work of another. Companies, such as IT Services, most definitely use such procedures, to ensure the proper processing of online-placed job orders for their contracted customers. The processing of agricultural products also requires in many cases such standardization. Such activities are even required of companies by government, as seen in European Union guidelines on the labeling and tracking of animals and meat products for human consumption or quality assurance in the organic products industries (EU Commission 2012).

Standardization of skills is when a person is trained in a certain way so that he or she coordinates automatically with others, unlike the concept of mutual adjustment, in which two or more people communicate informally among themselves to coordinate their work. All of the above-discussed means of coordinating communication and establishing standards lead to the development of a functioning organizational architecture, the differentiation of which was categorized by Mintzberg in assessing successful organizational types. Within this research, he identified general divisions existing at the heart of every large organization. There is the operating core, within which the basic work of producing the organization’s products and services gets done. The strategic apex is also always present in some form and is the ‘home’ of top management. Mintzberg recognized what he called the ‘middle line’, or that group of managers who stand in a direct line relationship between the strategic apex and the operating core. Middle manager is a common term for these individuals. Modern businesses also require a technostructure, i.e. the staff analysts who design the systems by which work processes and outputs are standardized in the organization. Finally, there are the support staffs, i.e. the specialists who provide support to the organization outside of its operating workflow. All these elements form a successful, basic organizational hierarchy, but Mintzberg divided these into specific classifications.

6.1. ábra - Figure 1.: Mintzberg's Organizational Types(Source: Internet 1)



The main successful organizational structures that Mintzberg identifies are the following:

1. The entrepreneurial organization.

2. The machine organization (bureaucracy).

3. The professional organization.

4. The divisional (diversified) organization.

5. The innovative organization ("adhocracy").

1. 6.1.The Entrepreneurial OrganizationThis type of organization has a simple, flat structure. It consists of one large unit with one or a few top managers. The organization is relatively unstructured and informal compared with other types of organization, and the lack of standardized systems allows the organization to be flexible.

A young company that is tightly controlled by the owner is the most common example of this type of organization. However, a particularly strong leader may be able to sustain an entrepreneurial organization as it grows, and when large companies face hostile conditions, they can revert to this structure to keep strict control from the top.

The entrepreneurial organization is fast, flexible and lean, and it is a model that many companies want to copy. However, as organizations grow, this structure can be inadequate as decision-makers can become so overwhelmed that they start making bad decisions. This is when they need to start sharing power and decision-making. Also, when a company's success depends on one or two individuals, there is significant risk if they sell up, move on to new entrepreneurial ventures or retire.

2. 6.2. The Machine Organization (Bureaucracy)The machine organization is defined by its standardization. Work is extremely formalized, there are many routines and procedures, decision-making is centralized, and tasks are grouped by functional departments. Jobs will be clearly defined; there will be a formal planning process with budgets and audits; and procedures will regularly be analyzed for efficiency.

The machine organization has a tight vertical structure. Functional lines go all the way to the top, allowing top managers to maintain centralized control. These organizations can be very efficient, and they rely heavily on economies of scale for their success. However, the formalization leads to specialization and, pretty soon, functional units can have conflicting goals that can be inconsistent with overall corporate objectives.

Large manufacturers are often machine organizations, as are government agencies and service firms that perform routine tasks. If following procedures and meeting precise specifications are important, then the machine structure works well.

6.2. ábra - Figure 2.: Machine organization(Source: Internet 1)



3. 6.3. The Professional OrganizationAccording to Mintzberg, the professional organization is also very bureaucratic. The key difference between these and machine organizations is that professional organizations rely on highly trained professionals who demand control of their own work. So, while there is a high degree of specialization, decision-making is decentralized. This structure is typical when the organization contains a large number of knowledge workers and this is why it is common in places like schools and universities, and in accounting and law firms.

The professional organization is complex, and there are lots of rules and procedures. This allows it to enjoy the efficiency benefits of a machine structure, even though the output is generated by highly trained professionals who have autonomy and considerable power. Supporting staff within these organizations typically follow a machine structure.

The clear disadvantage with the professional structure is the lack of control that senior executives can exercise, because authority and power are spread down through the hierarchy. This can make these organizations hard to change.

4. 6.4. The Divisional (Diversified) OrganizationIf an organization has many different product lines and business units, one will typically see a divisional structure in place. A central headquarters supports a number of autonomous divisions that make their own decisions and have their own unique structures. One often finds this type of structure in large and mature organizations that have a variety of brands, produce a wide range of products, or operate in different geographical regions. Any of these can form the basis for an autonomous division.

The key benefit of a divisional structure is that it allows line mangers to maintain more control and accountability than in a machine structure. Also, with day-to-day decision-making decentralized, the central team can focus on "big picture" strategic plans. This allows them to ensure that the necessary support structures are in place for success.

A significant weakness is the duplication of resources and activities that go with a divisional structure. Also, divisions can tend to be in conflict, because they each need to compete for limited resources from headquarters. These organizations can be inflexible, so they work best in industries that are stable and not too complex.

If a company’s strategy includes product or market diversification, this structure can work well, particularly when the company is too large for effective central decision-making.

5. 6.5. The Innovative Organization ("Adhocracy")The structures discussed so far are best suited to traditional organizations. In new industries, companies need to innovate and function on an "ad hoc" basis to survive. With these organizations, bureaucracy, complexity, and centralization are far too limiting.

Filmmaking, consulting, and pharmaceuticals are project-based industries that often use this structure. Here,



companies typically bring in experts from a variety of areas to form a creative, functional team. Decisions are decentralized, and power is delegated to wherever needed. This can make these organizations very difficult to control.

The clear advantage of adhocracies is that they maintain a central pool of talent from which people can be drawn at any time to solve problems and work in a highly flexible way. Workers typically move from team to team as projects are completed, and as new projects develop. Therefore, adhocracies can respond quickly to change by bringing together skilled experts able to meet new challenges.

However, innovative organizations have challenges. There can be serious and frequent conflict within an organization when authority and power are ambiguous. Dealing with rapid change is stressful for workers, making it difficult for a company to find and keep talent. However, given the complex and dynamic state of most operating environments, adhocracy is a common structural choice, and it's popular with young organizations that need the flexibility it allows.

6.3. ábra - Figure 3.: Adhocracy(Source: Internet 1)

Mintzberg's classification is just one way of looking at the ways in which organizations are structured. Other relevant strategies include Milesand Snow's Organizational Strategies (Miles-Snow, 1978), Porter's Generic Strategies (Porter 1980, 2001), and The Greiner Curve (Greiner 1988). As there is no one "right" organizational structure, it is important to understand how structure relates to the variety of attributes in a company. Mintzberg gives us a useful description of common structures that are appropriate in different circumstances. As he himself has noted, none of these is necessarily ideal – nor should they be misinterpreted as such. Rather, they are very simplified versions of what exists in real life organizations all over the world. Looking at companies closely, one discovers just how common it is for a company to have a combination of elements from each structural type. What remains consistent is that in considering an organizational structure, management must always analyze the environment, assess internal needs and capacities, and then ensure that its structure properly suits its strategy and environment.

6. ReferencesEU Commission (2012): White Paper on Food Safety. http://ec.europa.eu/food/food/intro/white_paper_en.htm.

Greiner, L. E. and Schein, V.E.(1988):Power and Organization Development: Mobilizing Power to Implement Change. Prentice Hall Organizational Development Series, FT Press.

Kowitt, B. (2011): Why McDonald’s wins in any economy. CNNMoney Online. http://management.fortune.cnn.com/2011/08/23/why-mcdonalds-wins-in-any-economy/. August 23, 2011



Miles, R.E. - Snow, C.C. (1978):Organizational strategy, structure and process, New York, McGraw-Hill.

Mintzberg, H.(2001):Why I Hate Flying. Tales for the Tormented Traveler. New York, Texere.

Mintzberg, H. (2000):Managing Publicly. Toronto, Institute of Public Administration.

Mintzberg, H.(1998):Strategy Safari. A Guided tour Through The Wilds Of Strategic Management. Harlow, UK, Pearson Education.

Porter, M. E. (1980):Competitive strategy: Techniques for analyzing industries and competitors. New York: Free Press.

Porter, M. E. (2001): Strategy and the Internet. Harvard Business Review, 79(2): 62–78.

Internet 1:

http://www.lindsaysherwin.co.uk/guide_managing_change/html_change_strategy/07_mintzberg.htm. (accessed on 27 July 2012)


7. fejezet - 7. The concepts and dynamics of groupsIt is hard to define when humans started to cooperate and work in groups. Obviously, from the very start of human being people tended to think in groups, since meeting individual needs requires social life. It has always existed, still little was known about the phenomenon’s nature until the novel sciences (economics, sociology, psychology, etc.) after the enlightenment started to analyze the characteristics of the human cooperative activity.

Today we are living in communities, groups exist even at work, recreational and leisure times, and community has a central role in life. To orient and prevail currently, nature of socialization seems essential, such as what I should face when joining a community, such as a social club, entering a new workplace, or even establishing a cultural association. The group focuses on the social life, the permanent social interaction between group members assumes the internal communication, the perception of the individual, and upcoming and operating personal relationships, mutual preferences, created status and roles (Gyökér, 2004). Piros (2004) believes that the improvement of ability to cooperate, the skill to work in teams together with quality work performance are getting more and more important beside current expectations. The organization itself has a major role in the definition the managerial methods and leverages, and one of is the definition of working and operation of groups (Juhász, 2004).

1. 7.1. The concept of groupsThere are very diverse approaches when trying to understand the meaning of the term „group”, a possible reason for that is the interdisciplinary of the subject.

• According to Weick (1969) such procedures exist, which establish, upkeep and dissolve community activities and later define the work of organization and the method, by which procedures and the organization itself are realized. The definition of the organization or the group is done by envisaged objectives of the participants.

• There is an approach where group is a social unit which is built up of individuals of different status and role relationship, the behavior of which is regulated by norms and values of the formation (Sherif, 1969).

• In the understanding of psychology group may be constituted of any people, who have interactions, aware each other psychologically, they consider themselves a group (Dalton-Lawrence, 1970). Lawless (1972) emphasized interaction as a central nature of groups, which requires that an individuals behavior should influence the behavior of other members, and observations, beliefs, values and objectives must be shared.

• Lewin (1975) believed that group is a dynamic, open system characterized by the relationship of the members and it is integrated into the larger whole of the society.

• Group is also considered to be a psychological form of individuals, and it is the most important and ancient social formation from the point of view of the individual (Csepeli, 1997). These also form the basic units of organizations, the structure and hierarchy of which determine the structure and operation of the given organization (Berde, 2003).

• Dienesné (2003a) defines the three most important natures of the groups: they are built up of two or more individuals, who have interactions, members have mutual objectives and personally influence each other, and a special “we” consciousness is developed during the operation.

2. Primary and secondary groupsCooley (1909) defined primary and secondary groups. Primary groups mean such dominant relationship, which is the most elemental part of the human system of values. Primary group is usually the family of the individual, which is still the most important social formation, and most important element of social life (Internet 1). The members of primary groups live together, considering membership it is small, and members are connected by lineage or marriage. A most important nature is that members know each other, connect each other and practice mutual control. It is also characterized by intimate, face to face development of connection and cooperation


7. The concepts and dynamics of groups

(Cooloey, 1909). Relations of the secondary groups may be experienced mainly in the social life; those are less personal and have a more regulative nature. Operations of these are determined by formal rules, relationships internally are less personal, and members may do not know each other and lack any intimacy. They are developed consciously and have a larger membership. They may be considered as organizational products of social labor division (Csepeli, 1997).

3. 7.3. Classification of groups- Group scaleA primary base for the differentiation of the groups is usually the scale. We may identify group of two (dyad), three (triad), four (quadrate) an even larger groups. A group, which has fewer members than 15 may be considered a small group. Where the membership is more than 15, these are usually regarded as large groups or communities (Berde-Dajnoki, 2007). The most frequently suggested scale of group is between 5 and 7 individuals, since benefits will be experienced at this scale and the drawback of the membership number is still relatively slight. The number may also depend on the function, the smaller number may be beneficial when realizing a task, and the larger number may be useful at problem solving groups (Dienesné, 2002).

The satisfaction of the members usually decreases with the increase of its number of members, results are personally less considered to belong to the individuals (Tosi et al, 1986). The increasing number strengthens the process of getting to the periphery, decreases the individual activity and amplifies inhibition. From the point of view of members small membership is beneficial, since the feeling of togetherness is stronger, absenteeism and social malingering is less frequent and typical (Katona, 2005). By increasing the membership a difference may experienced in parallel with it (Table 1).

7.1. ábra - Table 1: Changing nature of groups caused by the increase of the membership (based on Dienesné, 2002.

4. 7.4. The classification of groups-the formalityMany authors deal with the subject of group formality (Morvay, 1997, Carrer- Scheier, 1998). A formal group is such a group, which is established formally, and conditions and regulations for operation are assured by formal authority (Dienesné, 2003b). A typical formal group is an organizational department (Andorka, 2003). Formal groups have formal framework. They also possess formal organizational functions, which may focus on work performance, distribution or control and they also may play an important role in decision making, information collection or maintaining relationship. The informal origin of groups comes from the human social needs; rules are usually determined by social norms and value system (Torgersen-Weinstock, 1983). Formal and informal groups may be differentiated by numerous factors (Table 2):



7.2. ábra - Table 2: Differences of formal and informal groups (based on Berde et al.,1998).

An additional factor of the classification of the groups is the differentiation of groups by resource allocation, dominance and dependence, this is why a group may be strong or not, influential or directed. Corey (1995) classified open or closed groups, which is obviously in connection with the task realization. A group is usually a changing, dynamic whole. Groups may be permanent or temporary. We may witness such permanent, stable groups, in the agriculture (such as an animal caring brigade). A temporary, changing group is such one, the composition and task of which are changing and they participate in the production of numerous products (such as the harvesting group).

5. 7.5. Internal interaction and dynamicsInternal processes are usually regarded as group dynamics. Professional literatures (such as Lewin, 1975) most frequently concern with social exchange theory, group development stages, group structure, group cohesion, the relationships between status and role.

Individuals rarely become group members accidentally. A simple notification of the existence of the group influences the individual, its behavior. Blau (1964) and Homans (1961) believe that accession to a group and participation in a group formation delivers such personal attitude, where the individual examines the group membership in the light of benefits and drawbacks. The individual weight these factors, but we also must aware that it is also valid for the group itself when the membership rises. The social exchange theory revealed that we only join a group when it provides the maximum of the valuable, precious rewards and means the slightest possible costs for us. Table 3 illustrates the most frequent benefits and drawbacks of group membership:

7.3. ábra - Table 3. Benefits and drawbacks of group membership (based on Blau (1964) and Homans (1961))



Lebon (1910), and shortly Freud (1920) developed theories considering the dynamics and development of task realizing groups. Group development was also responsible for the changing performance of the famous Hawthorne experiments (Mayo, 1933). The first, detailed theory for group development was published in the “Theory of group development” by Benis-Shepard (1956). Sheriff (1969) later described transitional stages in the process between the collective of individual and the group. Groups go through 4 development stages in the understanding of Tuckman (1965) and this is the most typical and well-spread approach in this subject:

• Forming. The collective is not regarded as a group yet, it is only a set of people. This stage is characterized by negotiations about the objectives of the group.

• Storming. Many groups experience this conflict rich stage, where original mutual objectives, methods, managerial style, roles, work and behavior norms are questioned and debated, or refined. In this stage, many personal, individual aspirations are observed and a certain level personal hostility may arise. Sometimes this stage in not experienced, and when not negotiated, problems and doubts will equally exist under the real operation and will prevent practical work.

• Norming. Norms are basic operational and behavioral rules for of the group. In this phase basic norms and operational practice will be established, such as how, when and where to operate, how to trust in each other, how open we should be and others.

• Performing. Only those groups arrive at this stage, which pass through all the previous stages and may perform efficiently on its total value. This phase is characterized by the actual performance. The author later revealed an additional phase of the adjourning. As the group project ends, the group disbands and dissolves in the adjournment phase.

Structure usually means the vertical and hierarchal positions internally for us (together with norms, scale (Bakacsi, 2007)).

Status is the relative position or state, which is typical of an individual inside of a group, it explains the mutual relationship among members and hierarchal arrangement of the members. We consider it to be the vertical position of the individual internally. Status may be recognized easily and enables to weight people around us together with the scale of appeal and attraction Mead (1973). Even the most democratic organizations have hierarchy, differentiation of people. The behavioral technique required to fill in a status is the role, which includes attitudes, values, and behavioral samples. Role is the behavioral expectation of group members (Farkas, 1997). If status is the vertical role then role must be the horizontal one and determines the horizontal position of the individual. Many classifications of the roles were revealed lately. Bakacsi (2007) described task orientated roles, relationship orientated roles and individual related roles:

• Task orientated roles: they ease and coordinate decision-making and task realization, such as initiating, objective definition, coordination, information gathering and supply, etc.)

• Relationship orientated roles: they promote the survival and development of the group, help to maintain togetherness, good atmosphere and welfare of the members (such as mediation, encouragement, follow, observation, scapegoat finding, etc.)

• Individual related roles: the emphasis on the individual instead of the group (blocking, acknowledgement, dominance, dependency, etc.)

Performance usually depends on the harmony of the task and relationship related roles. Those groups perform comparatively poorly, where individual roles prevail. Roles may be temporary (such as at school) or permanently (such as an adult role). A status usually include a whole series of roles, and the conditions for role set are suitable for the explanation of why an individual – in a complex, open form of society – tries to realize a dedicated role sample or a series of that (Merton, 1957). The examination of roles is a preferred subject of social psychology experiments. Through the classic, famous prison experiment in Stanford University, Zimbardo et al, (1973) faithfully demonstrated that individuals may identify themselves with predefined roles. Volunteers were selected (22) for the experiment and some of them were appointed to be prisoners, others were appointed as guards. Some formal requirements were defined in their agreements (such as uniform) but no behavioral rules were determined. Communication soon became official and impersonal, and some less direct forms of aggression were soon experienced from the guards. Identification with the defined rules soon turned into abnormal, the experience had to be terminated sooner than expected, at the end, prisoners were delighted and the guards were disappointed. Other articles of the experience leader (Zimbardo, 2000; Zimbardo, 2003) deeply



described the individual influencing effects of the roles in diverse situations.

One of the other most referred experiment of the roles was done by Milgram (1974), which first was published in 1963, in the Journal of Abnormal and Social Psychology. As researchers of Yale they wanted to know how obedience to the authority influences human behavior (decision-making). It is obvious that millions of people were slaughtered between 1933 and 1945 by Germans. These cruel actions might be developed in a single mind but its realization in large scale required thousands, obedient people (Milgram, 1963). To reveal the nature of it researchers have selected 40 participants by ads and direct letters, and asked them to participate in memory experiments. Considering age, they were between 20 and 50, and participants were post officers, high school teachers, distributors, engineers and physical workers. Only one of them has not finished elementary school but others had diploma and PhD degree. Basic conditions of the experiment are illustrated in Figure 1.

7.4. ábra - Figure 1: Basic situation of the Milgram experiment (based on Internet 2).

E was the leader of the experiment, T was the experimental individual (teacher), L was the pupil. The only experimental person was the teacher; his behavior was studied. The teacher had an electric shock control knob, by which he could electrify the pupil if necessary. The role of the leader was to maintain the process of the experiment. The teacher read up pairs of verbs, and the pupil had to answer by defining the correct verb, he also indicated it by pressing a button. When he gave the wrong answer, the teacher was directed to give an electric shock to the pupil and to give an increasing shock for the further questions (Milgram, 1963). The tension ranged between 15 V and 450 V (tension was not real). The experiment was intended to examine the effect of numerous factors, still researchers supposed that human behavior may only be slightly influenced. Milgram (1963) asked a panel of researchers formerly to predict the final result, according to them 10% of the teachers would exceed the 180V but no one will be so obedient to finish the experiment by going to the final tension. They were all wrong since all the teachers exceeded the predicted limit (180V); no one has stopped until 300V actually. There were differences between the members considering where they stopped, 14 persons stopped between 300 and 375 V, all the others (65%) went to the final limit. The experiments were also carried out internationally, and in some countries (Spain, The Nederland and Germany) 80-90% of obedience was experienced. The difference in perception between role and personality may result in conflicts, so there are further problems connected to the roles (Griffin, 2008):

• Role ambivalence. People are uncertain about what they are expected to do and they may not be sure what form of behavior will be accepted or denied by the others.

• Conflict between roles. There is a conflict between expectations and requirements of different roles, when a single person fills in many of them (such as a man may be a manager and the father of a person equally).

• Conflicts inside the role. A classic sample of it is the situation of middle level managers, and they turned out to be managers and subordinates equally.

• Conflict between the role and personality. A typical instance is that sometimes internal conviction must be sacrificed at meeting expectation of a role, and the personality becomes divided or forced to unprincipled compromise (such as an agent selling bad hover).



The connective power between the members means that synergy, which is increased when members maintain tight and vivid relationship and sometimes it decreases by the connection with the other groups or the external world. Cohesion forms a feeling of affiliation and in many cases it means the reason for entering the group. Cohesion is a basic term of dynamics, commitment and emotional relationship may considerably differ inside a group, since these may be influenced by other factors. Factors influencing group cohesion may be the following (Daft, 1997): scale of the group, the dependence of members from the group, agreement in objectives, meeting objectives, expectation and pressure of management, the status of the group. Other authors define factors promoting and preventing cohesion. Szilágyi - Wallace (1983) have defined that 5 factors to increase and 5 to decrease cohesion inside a group. Table 4 illustrates these factors:

7.5. ábra - Table 4: Factors affecting cohesion (based on Szilágyi - Wallace(1983)).

Norms are internal expectations and hopes, which concern behavioral forms (Berde et al, 1998). Norms are suitable for the expression of values, attitudes and beliefs, and mainly concern for those how and what should be realized in life, at work. Robbins (2003) defined 4 classes of norms, such as performance norms, resource distribution norms, public behavior norms and informal communal norms. Bakacsi et al. (1991) differentiated the following norms: labor related norms, fairness norms, loyalty and reliability norms and reciprocity norms. Norms are sometimes hard to be influenced. Conformity is a related term; it means that one follows the prescribed norms. Conformity has its reasons (such as preventing punishment and gaining reward) and has its process (obedience, identification, internalization (Kelman, 1958; 2006). A typical experiment of studying conformity was of Asch (1951) to prove how people accept pressure of the group. A special section of group examination is the field of inter-group relationships. Pataki (1969) considered the term of group relationship as relations between 2 or more groups, which may be characterized by friendship or hate, dominance or subjection, or even war or peace. These are in strong connection with anomalies of the society, such as reality perceptional distortion, ethnocentrism, etc. There are 3 main forms of the relations (Dienesné, 2003a): cooperation and exchange, dominance and subjection, conflict and competition. One of the most systematically conducted and studied experiment was done by Sherif-Sherif (1969). They have witnessed group formation and later induced such experimental conditions, in which two groups conflicted and its process was described in details. To dissolve conflicts, (Spiegel-Torres, 1998) defined management possibilities: the definition of supreme objective, the selection of mutual enemy, the possibility for negotiation, the analysis and correction of perceptual torsions and faulty attributions

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Tuckmann, B. W. (1965): Developmental seqences in small groups. Psych. Bull. In: Csoportlélektan. Szerk: Pataki F., Gondolat, Budapest.

Weick K. E. (1969): The social psychology of organizing. Addison-Wesley, Reading,

Zimbardo, P. G. – Haney, C. – Curtas, B. (1973): A study of prisoners and guards in a simulated prison. Naval research reviews, Washington.

Zimbardo, P. G. (2000): The psychology of evil: Seducing good people into evil deeds. Conference Lecture. Southeastern Psychological Association, New Orleans.

Zimbardo, P. G. (2003): A Situationist Perspective on the Psychology of Evil: Understanding How Good People Are Transformed into Perpetrators. In: The social psychology of good and evil: Understanding ourcapacity for kindness and cruelty.(Ed.): Miller, A., Guilford, New York.

Internet1: http://www.mtv.hu/cikk.php?id=121854 (accessed on July 2, 2007)

Internet2: http://lipflip.org/images/2008/milgram.png (accessed on 20 November, 2010)


8. fejezet - 8. The management of groupsThere are two diverse, well separated trends, paradigms regarding the qualification of corporate roles of groups. In the understanding of one approach work performance in groups are less high and effective and group work may result in performance decrease. An earlier researcher of this subject was the French agricultural engineer Ringelmann (1913), who tried to reveal the reasons for the differences between the performance of group work and cumulated individual work. In his experiments he had found that the rise of number of group members dynamically decreased the mean of the performance of individuals, and it enabled to conceal individual activity (Ingham et al, 1974). According to Ringelmann(1913): „When employing men, or draught animals, better use is achieved when the source of motive power works alone: as soon as one couples two or several such sources to the same load, the work performed by each of them, at the same level of fatigue, decreases as a result of the lack of simultaneity of their efforts” (Internet 1)

The Ringelmann-effect is the tendency for individual members of a group to become increasingly less productive as the size of their group increases (Forsyth, 2009). According to Ringelmann (1913), groups fail to reach their full potential because various interpersonal processes detracts from the group’s overall proficiency. Namely, two distinct processes have been identified as potential sources for the reduced productivity of groups: loss of motivation, and coordination problems. Regarding the loss of motivation, group members tend to rely on their co-workers or co-members to furnish the desired effort required for a communal task. Although group members generally believe that they are contributing at maximum potential when asked, evidence has indicated that members exhibit loafing even when they are unaware that they are doing so (Karau-Williams, 1993). Leverages to solve these kinds of problems may be the following (Internet 2):

• Identifiably should be increased: When people notice that individual ideas or performance are identifiable (e.g., subject to evaluation), they are motivated to exert greater effort towards a group task. Further information on this provided by Harkins -Jackson (1985).

• Free-riding should be minimized: Those persons, who exert social loafing usually fail to contribute to standard because they believe others will make up for their slack. Therefore, individual members should be made to feel like they are an indispensable asset of the group, by increasing their personal role within the group. Further information on this is provided by Kerr-Bruun (1983). The inborn predisposition for loafing was also identified by Taylor (1911), who wrote the following: „The loafing or soldiering proceeds from two causes. First, from the natural instinct and tendency of man to take it easy, which may be called natural soldiering. Second, from more intricate second thought and reasoning caused by their relations with other men, which may be called systematic soldiering. Soldiering may be reasoned implicitly (why should I work hard when that lazy fellows get the same pay that I do and do only half as much work) or explicitly (If I work too hard, the others will give me a licking). Many organizations suffer from these kinds of performance retention, which, together with defective system of management causes considerable harms.

• Group objectives must be set: Harkins-Szymanski (1989) have revealed that those groups, which establish clear, explicit goals tend to outperform groups that have lost sight of their objectives.

Considering the coordination problems, even if group members possess the abilities and expertise required to complete an assigned task, they may fail to coordinate their efforts in a productive way. An effective synchronization of the actions of the members is quite often necessary (Forsyth, 2009). Taylor (1911) almost parallel with Ringelmann (1913) had also qualified group activity as one harmful and dangerous in the corporate performance. He wrote „As another illustration of the value of the scientific study of the motives which influence workman in their daily work, the loss of ambition and initiative will be cited, which take place in workman when they are herded into gangs instead of being treated as separate individuals. A careful analysis had demonstrated the fact that when workman are herded together in gangs, each man in the gang becomes far less efficient than when his personal ambition is stimulated; that when men work in gangs, their individual efficiency falls almost invariably down to or below the level of the worst man in the gang; and that they are all pulled down instead of being elevated by being herded together. For this reason, a general order had been issued at Betlehem Steel Works (where he worked) that not more than four men were to be allowed to work in a labor gang without a special permit to extend for one week only. It was arranged that as far as possible each laborer should be given a separate individual task. As there were about 5000 men at work in the establishment, the


8. The management of groups

General Superintendent had so much to do that there was but little time for signing these special permits”. This is - after carrying out experiments and making analysis - the instutionalization of the elimination of groups-gang activity inside a corporation.

This classic approach of scientific management emphasizes that management and its framework with the organization itself is based on strict principles, which are valid for all kinds of organizations. Soon it became obvious that remuneration of work is not the only one motivating force, in the behavior of a groups single conducts play an important role, and supervisors have a considerable role in the maintenance of productivity and satisfaction of laborers. Principles of scientific management later was justified to only have connection with organizations of high volume and mass production, probably since these results were achieved by those researchers, who have gained their experience of mainly high volume and mass production (Schleicher, 1981).

The other paradigm in contrast with the former idea emphasized the efficiency and effectiveness of group operation. Moede (1927) in his experiments had found that by systematically changing individual performance, group performance may be increased. Another researcher (Koehler, 1927) had similar results, in his experiment of small groups, group performance have exceeded the mean of individual performance, regarding mainly physical work.

One of the most famous experiments was carried out by Elton Mayo. By the lead of the researcher, the Western Electric Company at Hawthorne Works in collaboration with the National Research Council, studied the relation between intensity of illumination at work and the output of workers (since electric companies have tried to prove for long that industrial users need more light to increase productivity). Since many other factors influenced performance, researcher had decided to control the factors, especially fatigue and asked six girls to work in a test room away from their regular department, to be subject to changes in working hours, rest pauses and workday length, physical health, amount of sleep and diet, and to have their comments on work recorded while their output was measured. For 5 years accurate records were kept of their performance until the depression ended the study in 1933.

8.1. ábra - Figure 1: The Hawthorne layout

Source: Internet 3.

Detailed analysis would show that there may be an association between output and the physical environment at extreme conditions, but within the limits of the test room physical changes appeared to have no definite effect on output rate, since output rate rose from one state of the study to the next, even putting them back to the original circumstances, output did not fall back to the original level. Researches concluded that changes in output could be attributed to changes not only in work conditions, but also work attitudes and social relations, such as celebrating birthdays, helping anyone of them who was fatigued, in time friendships grew and continued after work, etc. (Trahair, 2009). The change in supervisory style and human relations were mainly believed to be the true cause of the increased productivity (Daft, 1997). Most early interpretations, however agreed on one thing: money was not the cause of the increased output (Roethlisberger et al, 1939). Recent analyses of the experiments, however suggested that money well have been the single most important factor (Parson, 1974). An interview with one of the original participants revealed that just getting into the experimental group had meant a huge increase in income (Bolton, 1991). Mayo (1945, 1947) in his writings emphasized the social side of human and role of social processes at work performance. One of his major results, that basic human relation in group formation and operation largely influences production. We must notice that these early results were also gained by the study of mass productions.



The classic approach used the term gang, human relations mentioned groups, and lately the term team became widely used and accepted. There are different aspects of the approach of the phenomenon: Schermerhorn et al, (1995) classified it by formality, Ingram-Desombre (1999) by its voluntary membership and Belbin (1998) defined it by its intensity of cooperation. Berde (2003) considers team a group, which is heterogeneous, it is a composition of people of diverse skill and qualifications. These formations usually have to cope with a high novelty content objective, it means a quality difference in performance, this is why it differs from the functional organizational unit, which performs permanent tasks (Jarjabka, 2007). Every member is equivalent in the team, all opinions matters. This is why it is hard to define a hierarchy in the team, only roles differ, while in a group has its hierarchal structure. In this chapter we do not differ team from group, we use both terms equally as equivalent ones. The difference in application has its importance, since preparation, analytical, decision-making tasks require the integration of competences since task may be solved more efficiently and effectively, naturally by the application of adequate method of work such as brainstorming.

Beside physical work, mental work has an increasing role. A diverse approach is required for carrying out a project, where quantity or quality of work may exceed human capacity (Tenner-Detoro, 1998). The methods for the preparation of an occasional, knowledge intensive and innovative tasks has already been established in the ’50ies, the first process were related to the name of Osborn (1953).

The bases for the collective mental creative techniques, as problem solving processes are justified by psychological reasons, such as:

• Human can produce twice as much ideas in the same time when her evaluation is postponed later;

• The quality of ideas increases with their numbers;

• Collective creative mental work enables to produce more better ideas than the amount of individual problem solving concepts (Dienesné, 2003).

Osborne (1953) suggested to:

• Focus on quantity: Facilitate problem solving through the maximum quantity of ideas.

• Withhold criticism: Focus on ideas rather than criticism (keep it later).

• Welcome unusual ideas: Unusual ideas are welcomed (new ways of thinking)

• Combine and improve ideas: Good ideas can be integrated and combined

According to Kövesi (2006), most important collective creative methods are the following:

• Brainstorming. It is a creative group technique, the point of which is to generate personally ideas and to present those to the group orally. Ideas are registered on a flipchart or table, but first none of them are criticized. We need to focus on the generation of more and more ideas and one idea usually contribute to the born of another one. Evaluation usually is separated from the generation. Experiences suggest that only 10% of the ideas are applicable, and sometimes the strangest ones can be useful (Pallai, 2010).

• Rohrbach 635 technique. It is a written form of idea generation, where we set up a group of 6 people; each of them received the question, which has to be solved. All participants write on the idea collecting paper 3 suggestions/solutions, with some details. After that everybody passes the paper to the one next to her, new ideas and suggestions to the existing ones may be added. The work finishes when the original paper got back to the original person. By the application of this method, we can receive 90 ideas (6x3x5) in maximum 35 minutes.

• Philips 66. This method was first implemented at Philips. A large group is broken into groups of six people, where these groups seek answer for a well-defined question in six minutes. Result of the idea generation then passed to the moderator and all ideas are presented to the participants. After that, all the participants again are also broken into groups of six, where they try to develop the ideas presented or try to come up with new ones. Activity stops after covering all the possible ideas or when groups run out of ideas.

• Delphi method. This is applied when members do not or cannot meet personally and we have enough time to work out the solution. The point of the method is the collection of ideas by questionnaires, which are written. It eliminates debate between experts and by the application of multi-turn questionnaire (as a feed back)



opinions may be compared. This job is usually directed by a private moderator or even a group itself by defining and realizing the method. Usually 3-5 turns are necessary until experts agree.

• The Nominal Group Technique combines the latest results of social psychology and the former creative techniques. All the invited participants receive the questions and after that work on their problem solving ideas. After finishing that all participants orally present their suggestions, in this phase criticism is forbidden. Suggestions are registered on a table and participants negotiate the ideas, ask questions or attach explanations. All the ideas then are voted, participants received points or cards, approximately 10-15% of the ideas may be qualified. All participants rank the ideas by their private aspects, and finally a ranked list of the ideas is available for the moderator.

Not all the teams are successful, since Dumaine (1994) in the Fortune newspaper described that interpretation of the team is often a source of problems. Experimental results of McDonalds-Keys (1996) not accidentally introduced the „seven deadly sins of team building”, which include the faulty selection of team members, impatience, scam, aimlessness, lack of authority, the force of inadequate communication system and the establishment of excessive group spirit.

For the assessment of group dynamics, Moreno (1934) has developed and Mérei (1996) has improved the method of sociometry, and by the application of that an objective exploration of the positive and negative relationship among group members. The sociogram is map of the group,which illustrates the individuals and sympathy connections of them. Experiments have also revealed that sociometric network is the channel of emotional flow and communications (Internet 4).

Professional literatures enabled us to work out a private model to study the management of group operation (Figure 2). Model covers all the processes of operation, it also breaks the whole in clearly defined details, phases. All phases may be treated as separate managerial tasks, where managerial approach and tasks depend on the actual phase. The process was broken into task defining, forming, activity and control stages and separate managerial tasks were paired to them.

8.2. ábra - Figure 2: The managerial process of group operation (based on own examination)



Figure 2 details that group operation has connection with the managerial activity. A basic managerial task is the definition of tasks and then whether to set up a team or not. Condition, type and membership are also important factors, which influence the characteristics of the groups. The collective of participants then possibly will go through the stages of development, where specific managerial interventions may be necessary (such as described in Blanchard et al, 2000). The operating groups will have its specific operation dynamics. The quite frequently referred faulty symptoms (errors) of dynamics may be the following:

• Group thinking. It is the mode of thinking that happens when the desire for harmony in a decision-making group overrides a realistic appraisal of alternatives. Group members try to minimize conflict and reach a consensus decision without critical evaluation of alternative ideas or viewpoints (although debates lie under the surface). Antecedent factors such as group cohesiveness, structural faults, and situational context play into the likelihood of whether or not groupthink will impact the decision-making process (Internet 5). A typical instance of the groupthink was observed when President Kennedy and his advisors have uniformly decided to attack Cuba in 1961, and the expert group respecting the symbolic status of the president excessively tried to agree and overwhelming individual doubts. Awaring the failure, later the President explicitly asked them to think critically and often missed the meeting so that he would not influence members by his personality (Diamond, 2007). This symptom first was observed by Jannis (1972) and later (Jannis-Mann, 1977) analyzed the possibility to avoid or manage group think, by analyzing numerous results of group decision processes.

• Apollo syndrome. The Apollo syndrome' is a phenomenon discovered by Belbin, (2000) where teams of highly capable individuals can, collectively, perform badly. In experiments competing groups were set up of different composition, where an Apollo group was set up (which included members of good, analytical minds and high mental ability). However, the Apollo teams always proved to be ineffective or worse when competing with teams of more heterogeneous make-ups. One of the most important reason for that was that major time and effort spent in pointing and arguing about the flaws put forward by other people. The researcher also proposed a specific leverage called the Belbin–test, where individuals may identify themselves with the roles of Belbin: company worker, implementer, team worker, monitor-evaluator, shaper, resource investigator, plant and the chairman. In a typical group those functions should be connected to a member and the duplication of roles is advisable to be eliminated (Internet 6).

Management of organizational groups may be considered as a private managerial function. Activity should be studied in its process, or some kinds of milestones be inserted, by which activity may be controlled from time to time and offers the possibility of intervention.

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Blanchard, K. – Carew, D. – Parisi-Carew, E. (2000): Az egyperces menedzser csapatot épít. Bagolyvár Kiadó, Budapest.

Bolton, A.A. (1991): Hawthorne a Half Century Later: Relay Assembly Test Room Participants Remember (Hive Management Hist Ser: No 106. Hive Pub Co.

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Dienesné K. E. (2003): A társas hatás és társas befolyásolás. In. Vezetéspszichológiai ismeretek. Szerk.: Berde Cs. - Dienesné K. E., Campus Kht, Debrecen.

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Forsyth, D. R. (2009). Group dynamics (5th ed.). Pacific Grove, CA: Brooks/Cole.

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Harkins, S. G. - Jackson, J. M. (1985). The role of evaluation in eliminating social loafing. Personality and



Social Psychology Bulletin, 11.

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Ingram, H. – Desombre, T. (1999): Teamwork: comparing academic and practitioners’ perceptions. Team Performance Management. Vol 5., Bingley.

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9. fejezet - 9. Corporate cultureThe subject of corporate culture is usually covered in the framework of internal organizational environment considering most foreign professional literatures. One reason to study the subject was the Japanese push forward mainly in the field of automobile and microelectronic industry after the II.World War. Many authors (including Ouchi, 1981) have described cultural and corporate differences as main causes for the corporal advantages. According to Williams (2011) the internal environment consists of the trends and events within an organization that affect the management, employees, and organizational culture. Internal environments are important because they affect what people think, feel, and do at work.

According the functional approach (such as Berde-Láczay, 2005), the subject of internal culture is structured into the theme of corporate management. Regarding this field, basic principles to study were prepared by Schein (1992). Culture is „A pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems (Schein, 1992). „Organizational culture, sometimes called corporate culture, is a system of shared beliefs and values that develops within an organization and guides the behavior of its members. This may be considered as a social glue that brings members of the organization together. Similarly to the personality’s skill, the corporate itself also has its kind of personality, and the heart of it is the culture (Schein, 1999).

According to Berde-Láczay (2005) inside the term of culture in general (which is the sum of produced material and intellectual goods of humans) corporate culture is originated from the community in which we work together to achieve corporate objectives. Only such corporates, which operate for a long term and relatively independent, have their cultures. For the development of the culture it is inevitable that the unit itself should gain numerous common experiences, such preliminary beliefs namely develop as a result of common learning procedure based on experiences (Lawrence-Lorsch, 1967).

There are diverse functions of corporate culture. According to Smircich (1983), it has 4 functions:

• It provides organizational identity for the members.

• It facilitates collective commitment.

• It promotes social-system stability.

• It shapes behavior by supporting employees make sense of their surroundings.

The culture is a product of human coexistence and common work, which has numerous components. Culture has it material components, those which were produced, applied at work, but usually the spiritual products form a wider set. Although material goods become worn out, spiritual goods may stand the test of time, and sometimes it may spread from generation to generation in mostly those corporates, which are strong enough to survive. Culture may operate as a whole but it is usually build up of sub-cultures as the organization itself is made up of different elements. Since elements are numerous and diverse, the classification of the components seemed necessary. Schein (1980, 1985, 1994) split up the organizational culture into the following levels:

9.1. ábra - Figure 1. The levels of culture (based on Schein(1980, 1985, 1994))


9. Corporate culture

The two figures approach the subject of the culture from two points. The apple approach illustrates that the core elements are the fundamental assumptions, and the further components may be understood from inside, such as covering element, totally 5 elements are included. The later approach represents a hierarchy of 3 main group of elements, where basic assumptions represent the core, these are difficult to access because usually exist unconsciously. The second level, the values are conscious objectives, philosophies. Goods, produces (artifacts) are on the exhibition level; these are the surface, easy to recognize still sometimes hard to understand. A typical other figure, which usually symbolizes this structure is an iceberg, where visible parts (artifacts) arise from the water, still other parts lie beneath and these are not visible. From visible signs we may draw conclusions on the real content of the culture. This symbol of the iceberg also lets us know the unconscious part of the culture, which usually is not obvious for us. Sometimes members of a society do not aware of the levels of the private culture until they directly face another one (Fisher, 1981).

Williams (2011) emphasizes some most important parts of a culture:

• A primary source for corporate culture is the company founder. Founders like Bill Gates, Steve Jobs created organizations in their private images and imprinted them with their beliefs, attitudes and values. When they are not in the organization anymore they often turn into be heroes.

• The second way of identifying culture is to recognize and celebrate heroes. These are organizational people admired for their quality and results in the company. Jan Carlzon of the Scandinavian Airlines or Lee Iacocca of the Chrysler may be considered of corporate heroes. Their heroic nature originates from their behavior when they acted or reacted well in difficult situations (such as the former leaders in the time of the oil crises).

• To maintain and strengthen culture organizational workmates tell each other organizational stories to make sense of organizational events and changes and to emphasize beliefs, decisions, etc.

Berde-Láczay (2005) detailed further elements of the corporate culture:

• Culture not equals with the qualifications of corporate members but it must be stated that professionalism may strongly influence the established culture. Cultures of professions exist alone (since it is typical of a medical doctor, a lawyers, etc.), and cultural signs of a professional field may also be well identifiable.

• Traditions may also form an important part of the culture. To have a culture organizational past is necessary. Traditions originating form the past may mean the roots of organizational order of values and norms.

• Festivities, events (ceremonies) strongly connect to the culture. These are repeatedly organized actions, which represent and strengthen basic values, enable to identify objectives, heroes, key actors or the system of values. This promotes the belief that different components of the culture may be in relationship with each other. Almost all organizations have ceremonies (solely-such as birthday celebrating or connected to a social phenomenon, such as Christmas or Easter celebration). These may play a vital role in the life of the organization, since they introduce (new) roles of the members, lead new members into the organization, create statuses, and promote the identification with the roles, the organization, and increase cohesion (Tosi et al, 1986).

• The culture of management, the authority has a multiplying effect. Its style, sophistication, elegance or even inhumanity, cruelties equally affect all members. Basically, they dominate the internal culture in two ways:



humanity usually strengthens moral, ethical values and behavior and inhumanity (together with manipulation, hostility) may result in the weakening of the same values.

• A typical element of the culture is language, professional jargon of the organization. Phrases, which are nowhere else used and understood, are signs of the identification with the organization and the acceptance of the culture.

• Symbols may also represent values, shared beliefs of the organization. Physical logos, company cars, open space rooms representing equality, uniforms representing conservative values describe and exhibit most important sign of the organizations (Daft, 1992).

1. 9.1. Typology of culturesMany classifications are known from the professional literatures. A clear type is not identifiable in an organization, signs of different cultures are usually equally recognized. In the following section we try to introduce the most accepted ones.

According to Baker (2004) all organizations have cultures, still some appear to have stronger, more deeply rooted cultures than others. When a culture is strong, then it may be conceptualized as a coherent set of beliefs, values, assumptions, and practices embraced by most members of the organization. The emphasis is usually on

• the degree of consistency of beliefs, values, assumptions, and practice across organizational members;

• the pervasiveness (number) of consistent beliefs, values, assumptions, and practices.

Some consider a strong culture as a corporate advantage, since it promotes motivation, commitment and these may be turned into financial benefit as well. On the other hand, some noticed the drawbacks of the strong culture may result in unconstrained demands on corporate laborers, and these may also be means of manipulation and cooptation (Perrow, 1979). Schein (1992) proposed that culture of modern organizations should be strong but limited, differentiating fundamental assumptions that are pivotal (vital to organizational survival and success) from everything else that is merely relevant (desirable but not mandatory). Baker (2002) noticed that nowadays organizations need a strong organizational culture but one that is less pervasive in terms of prescribing particular norms and behavioral patterns than may have existed in the past. It is noticeable that after the change of regime in Eastern Europe, former corporate cultures were often meant the difficulties for new owners of the privatized companies. Moreover, multinational companies also brought in the country and into their new organizations their established foreign cultures, which meant challenges for laborers, since many elements had never been noticed until then.

Denison (1990) has identified 4 basic types of cultures according to their functions, and it all will be translated into four hypotheses. The dimensions by which classification is possible are addressing internal or external environment and internal dynamics orstability:

• the hypothesis of consistency-common values, beliefs in the organization will promote coordination and meaning, sense of identification

• hypothesis of the mission-the concept that shared objectives and strategies will drive organizational members toward common objectives

• participation hypothesis-the concept that participation will promote sense of responsibility and will contribute to commitment

• the hypothesis of adaptability-the concept that norms, beliefs will promote the organizational capacity to cope with challenges and adapt to changes.

Cameron et al. (2006) have introduced a methodology known as the competing values framework. In the framework of it, researchers have examined what are the values organizations consider important to raise their efficiency. They have identified two explanation values which interpret efficiency:

• Concentration inside or outside: the first means focus on the corporate members and internal efficiency, the later focuses on adaptability to the external environment



• Flexibility or tight control: flexibility means larger space to move and decisional freedom, the later expresses limits in behavior and decision-making.

By making dimensions of the four aspects, they have described a model of corporate culture (which, because of the contrasts may also be called as model of competing values):

By classifying cultures, they may be sorted into four types; these are the clan, adhocracy, market, and hierarchy (Figure 2.).

9.2. ábra - Figure 2: The competing values framework (based on Cameron et al.(2006)).

Details of these four types are the following (Kinicki-Williams, 2011):

• The clan culture has an internal focus rather than external, and values flexibility rather than stability. The culture has an internal focus and values flexibility rather than stability and control. They work like a family by encouraging collaboration among employees, striving to encourage cohesion through consensus and job satisfaction and to increase commitment through employee involvement. These kinds of organizations deal with employees and also develop them, customers are regarded as partners.

• The adhocracy culture has external focus and flexible values. Corporates having them seem to be rather innovative, creative and quickly respond to the market changes. Employees are empowered to risk and take challenges, start initiatives. This type is typical of currently emerging new companies.

• Market culture. It has external focus and stable, controlled values. Since these organizations are quite often market driven, laborers rarely feel satisfied: quality and performance requirements are declared. Those who meet them are rewarded, difference form the objectives are rarely tolerated. Rapidly emerging South-Asian automobile producer, KIA is an example of that.

• Hierarchy culture. This culture is characterized by internal focus and stable, controlled values. These kinds of companies typically possess formalized, structured work environment aimed at achieving effectiveness through a variety of control mechanisms. Automobile companies, post delivery organization in the US are typical examples.

•

Famous scholar Handy (1999) has defined four types of corporate cultures together with their identifiable symbols as well:

• The culture of the power or authority. The power culture is symbolized by a spider’s web. Key element of this structure is the charismatic leader. In some organizations the power is possessed by only few people, who are also decision makers, too. In a culture like this, some responsibilities are delegated but upper instructions must be followed strictly. In a strictly centralized organization like this, emerge and development may cause the organizational conditions and relations impenetrable.

• The role culture. This type of culture is symbolized by a Greek temple. In this culture authority and power are delegated inside a highly defined structure. These organizations are typical examples of bureaucracies: orders and duties come from statuses and positions, the operation is declared in documents (such as job



descriptions). These seem to be very stable units, where strength of the organization lies in the specialization inside its pillars. Interaction is have a nature of official.

• The task culture. It is symbolized by a lattice work. In the centre of the attention lie the task and its realization. It provides a considerable independency for the members; it applies team work (usually cross-functional or cross-professional ones) and realizes a specific performance centered approach. Typical of R+D organizations. Often refers to a matrix structure.

• Person culture. It is symbolized by a cluster. There are some organizations, where laborers fell that they are equally (if not more) important than their organizations their work for. In cultures like this individual are more concerned about themselves than the organization itself. It is typical of forming organizations, where the organization itself is not yet bureaucratic and strong authority has not been established. Statuses are usually filled in by personal skills and capacities. It is usually transitional, and soon becomes into the one of the previous three.

The other famous scholar Kono (1990) has studied the three basic elements of the corporateculture. He tried to answer the following questions:

• What can be considered as internal common values

• What is the typical concept of the decision making practice of the corporation, what are dominant samples and procedures

• What are the generally prevailing behavior customs

Decision-making has a central role in this list, and it is what dominantly influences internal culture. The three main elements may be broken into deeper ones:

• Values, which are accepted and followed by the members,

• The collection and understanding of information,

• The way of establishing and distributing concepts, objectives, orders,

• The ways of evaluation of ideas, concepts and the degree and method of taking risk,

• The development of cooperation between managers and laborers,

• The degree of loyalty to the company,

• The development of motivation.

In his work Williams (2011) covered the subject of changing corporate cultures. One method of changing a corporate culture is to use behavioral addition or behavioral substitution to establish new patterns of behavior among managers and employees. Addition means a process of having managers and employees paired with a new behavior, while behavioral substitution is having managers and employees perform a new behavior in place of another behavior. Beside behavioral elements, changing corporate artifacts is also a way of changing culture. Cultures can also be changed by hiring and selecting people with values and beliefs consistent with the company’s desired culture. The author considers changing culture a difficult job. There is no guarantee that previous elements will lead to success, probably the combination of these all may contribute to it.

According to (Trice-Beyer, 1991) there are the following types of culture changes:

• Revolutionary and comprehensive efforts

• Efforts that are gradual and incremental but nevertheless are designed to cumulate so as to produce a comprehensive reshaping of the entire organizational culture

• Efforts confined to radically change specific subcultures or cultural components of the overall differentiated culture.

According to Williams (2011), preliminary research showed that organizational culture is related to organizational success. Basic elements to these are the following:



• Those cultures which are based on adaptability (ability to notice and respond to changes), since cultures may also act as leverage of dysfunctions to prevent change.

• It should promote a high level of involvement of laborers in decision-making, and by doing this laborers will feel better sense of responsibility and ownership.

• A clear company mission is promoting the organizational drive and act as a guide to decisions and behavior of people.

• Consistency means that company actively defines and teaches organizational values, beliefs, and attitudes. Stable beliefs are widely shared and strongly held.

2. ReferencesBerde Cs. - Láczay M. (2005): Menedzsment. Nyíregyházi Főiskola, Nyíregyháza.

Baker, K. (2004). “Organizational Culture”. In Organizational Culture: An Introduction. Edited by Nasreen Taher. ICFAI University Press, India.

Daft, R. L. (1992): Organization Theory and Design. West Publishing, New York.

Denison, D. R. (1990). Corporate Culture and Organizational Effectiveness. John Wiley & Sons, New York.

Fisher, R. – Ury, W.(1981): Getting to Yes. Penguin Books, New York.

Handy, C. (1999): Undestanding Organizations. Penguin Books, London.

Kinicki, A. - Williams, B.K. (2011): Management- a practical introduction. McGraw-Hill/Irwin. New York.

Kono, T. (1990): Corporate Culture and Long-range Planning. Long Range Planning, Tokio.

Lawrence, P. R. – Lorsch, H. J. (1967): Organization and Environment. Managing Differentiation and Integration. Richard D. Irwin Inc. HomeWood, Illinois.

Ouchi, W.G. (1981): Theory Z: How American Business Can Meet the Japanese Challenge. Addison-Wesley Pub, Boston.

Perrow, C. (1979). Complex Organizations: A Critical Essay. Second Edition. Scott, Foresman Glencoe.

Cameron, K.S.- Quinn, R.E. - Degraff, J. – Thakor, A.V. (2006): Competing Values Leadership. Edward Elgar, Northampton.

Schein, E. H.(1999): The corporate culture survival guide. Jossey-Bass, San Francisco.

Schein, E. H. (1992-copyright 1985). Organizational Culture and Leadership. Jossey-Bass Publishers. San Francisco.

Schein, E. H. (1980-copyright 1965): Organizational Psychology. Prentice Hall, Englewood Cliffs, NJ.

Schein, H. E.(1994): Does Japanese Management Style Have a Message for American Managers. In: Barakonyi-Lorange: Stratégiai menedzsment. KJK., Budapest, 1994.

Smircich, L. (1983): Concepts of Culture and Organizational Analysis," Administrative Science Quarterly September.

Quinn, R. E. (1988): Beyond Rational Management. Jossey Bass, San Francisco.

Trice, H. – Beyer, J. (1993): The Cutures of Work Organizations. Prentice Hall. Englewood Cliffs, New Jersey.

Tosi, H. L. – Rizzo, J. R. – Carroll, S. J.(1986): Managing Organizational Behavior. Pitman, Murshfield.

Williams, C. ( 2011): Management. Cengage Learning, Ohio.


10. fejezet - 10. Managerial MethodsThe situation, the needs and personalities of his or her employees, as well as the culture of the organization, all determine a manager’s style. Organizational restructuring and the accompanying cultural change has caused management styles to come in and go out of fashion. There has been a move away from an authoritarian style of management, in which control is a key concept, to one that favors teamwork and empowerment. In many companies, managerial styles that focus on managers as technical experts who direct, coordinate and control the work of others have been replaced by those that focus on managers as coaches, counselors, facilitators and team leaders.

Today’s successful management styles involve building teams, networks of relationships and developing and motivating others. Presently, more significance is seen in management styles which are ‘hands-on’, i.e. in which the manager directly participates in work, relying more on people management skills, than directives. Known as accommodative management styles, this people-focused management encourages teamwork and employee participation in decision-making processes, motivating employees and promoting long-term growth prospects of organizations. Such managerial styles stand in stark contrast to authoritative management styles. Management theorists argue that there is hard evidence of the advantages companies gain in creating a company culture centered on such management styles, of which there are many, including: participative management, Total Quality Management (TQM), Management by Walking Around; Management by Objectives and employee empowerment.

1. 10.1. Participative managementParticipative management entails sharing information with employees and involving them in decision-making. Employees are motivated to run their own departments and make decisions regarding policies and processes. In companies suffering from employee malaise and low productivity, participative management may offer a means for quickly reenergizing staff. Nonetheless, participative management is not appropriate in every organization and at every level. This is because such a style assumes that an organization’s employees possess the skills and capabilities to contribute properly to managing problems on their own or that they have the requisite technical experience, communication skills and/or intelligence to make necessary decisions and to communicate these effectively. More importantly, this style assumes that such employees will be able to follow through, i.e. ensure that work is done properly and on time, regardless of whether such targets would require coming into conflict with those sharing an office with them. Regardless, it does hold true that an organization’s culture must support employee involvement and the issues in which employees get involved must be relevant to them.

Representative participation allows workers to be represented by a small group who actually participate. The goal of representative participation is to redistribute power within the organization. Employees’ interests become as important as those interests of management and stockholders. According to Robbins (2002), the two most popular forms of representative participation are works councils and board representatives. Works councils are groups of employees who have been elected by their peers and who must be consulted by management when making personnel decisions. Board representatives are employees that sit on the board of directors and represent labor interests. As with participative management, representative participation is a poor choice for improving performance or morale. Evidence suggests that the overall influence of representative participation is small.

2. 10.2. Total quality managementTotal Quality Management (TQM) represents a management style that incorporates all tasks of a company, in order to achieve a high quality product. Most important in TQM are its focus on customer satisfaction and quality, which are the responsibility of all employees, followed by the integration of an emphasis on teamwork. TQM logically involves every aspect of the company, asthe entire personnel of the organization, from the CEO to the lowest rank worker, must be committed to improving quality. Equally, TQM emboldens employees to grow by learning. Employees all lend a hand in anyprogress. This managerial style is geared towardsinvolving all employees in an ever-changing, continuous process, geared towards constantly striving for quality improvement. (Compare Goetsch et al., 2001)

In the United States, W. Edward Deming (1986) and Joseph M. Juran (1988) became the forerunners of the quality in management movement. Based on their experiences in post-World War II Japan, during which time


10. Managerial Methods

they practically revolutionized the quality of Japanese products in the 1970s, in the America of the 1980s, Deming and Juranserved as drivers for the quality management movement,which has come to typify successful American businesses. (Creech, 1995)

3. 10.3. Management by walking aroundManagement by Walking Around (MBWA) is a standard technique used by sound managers who are excellent at feeding in to what their employees are noticing about their organizations. The point of this managerial style is to work much like a good detective and tocollect as much gen as possible, and thereby preclude anypotentially damaging situation from evolving into an actual, severe problem. MBWA is based on the notion that it is through tuning into one’s employees and what problems they foresee, that management may steer safely clear of anybuddingcalamities.

MBWA benefits managers by providing them with unsanitized, real-time information about everyday work events which have potentialimpact on an organization’s effectiveness, but which is often not included in memos or reports.Knowing that employees are often hesitant to put concerns in writing, MBWA managers instead pay personal visits to every available employee, thereby assessingtheir employees’spirits and noting where the manager needs to act. MBWA is not to be utilized as a means by management to do the thinking for the employee, but to provide the staff with more of a mentoring-style leadership.

However, managers using this method must remain mindful of what their walking around is for: it is aimed at ensuring that processes already decided are properly carried out and that in doing so, planned aims are resulting in the intended outcomes. MBWA is not a means of keeping one’s employees busy by piling on new tasks and thus bringing already assigned tasks to a halt. Rather, MBWA is a means to an already determined end: planned and assigned tasks are checked, feedback on potential problems and certainty of successes is gained and targets are met by employees who understand that a helping, guiding hand is always nearby. (Pop M. - Pop D., 2008)

4. 10.4. Management by objectivesManagement by Objectives (MBO) involves the inclusion of all employees in determining, e.g. production or profit targets which must be tangible, verifiable, and measurable. MBO is founded on Peter Drucker’s 1954 book titled The Practice of Management, in which he describes a methodicalway of keepingevery individual employee and team in line with set company goals. Intel, the computer giant, is only one of several global companies that use MBO at all levels of their organizations. MBO works whenever management takes its overall organizational objectives and breaks these down into specific employee assignments and objectives. At each level, the overall objectives are interconnected through a “bottom up” approach, as well as a “top down” approach. As long as each individual achieves the goals set for them, then their departments will achieve their goals - logically, this means that the original organization objectives will be met, too.

There are four steps involved in the MBO process: setting goals, participative decision-making, implementing plans, and performance feedback. Top managers work with middle managers and middle managers work with lower level managers to set goals for their departments. Each manager then works with employees in the department to set individual performance goals. The participative decision-making step allows managers and employees to jointly set goals, define responsibility for achieving those goals, and set the evaluation process.

Managers are allowed to implement their plans and control their own performance. This step of MBO utilizes every manager’s expertise to benefit the organization and permits managers to continuously improve their skills. The final step is to continuously provide feedback on performance and achievement of objectives. By periodically reviewing employees’ performance, goals can be modified or new goals can be set. This step complements the formal appraisal system because the continuous feedback throughout the year keeps individuals informed of their progress. (Cherrington, 1994)

As with any other management style, the organization’s culture must be conducive for MBO to work. Top management must be committed and involved in the MBO program for it to be beneficial. This management style is not without its problems. Managers often set their departmental goals and objectives too narrowly at the expense of the organization’s strategic goals or objectives.

Another problem arises when managers are not flexible in setting up the goal-setting and evaluation processes, and employees lose the ability to respond to issues quickly. Unrealistic expectations about results are often a problem with MBO programs as is the unwillingness of management to allocate rewards based on the



accomplishment of individual goals.

5. 10.5. Employee empowermentEmployee empowerment is a style of management that puts managers in the role of coach, adviser, sponsor or facilitator. Empowerment involves delegating the decision-making authority regarding the action to be taken on a task that is considered to be important to both the manager and employee. The main reasons for implementing an empowerment program are to provide fast solutions to business problems, to provide growth opportunities for employees, and to lower organizational costs while allowing the manager to work on multiple projects. (Matejka, J. K., et al., 1999)

Employee empowerment is the most effective when management has set clear obtainable goals and defined specific accountability standards. The success of employee empowerment relies on the ability of management to provide resources such as time and money, support by way of legitimacy, and relevant and factual information so employees can make educated decisions. Training employees to take responsibility and make sound decisions that are supported by upper management as well as lower level managers are other areas that are important to the success of empowerment programs.

Employees benefit from empowerment because they have more responsibility in their jobs. Employee empowerment increases the level of employee involvement and therefore creates a deeper sense of satisfaction and higher levels of motivation.

However, there are potential problems with empowerment programs that often result in unfavorable outcomes. Many times, managers delegate trivial and boring tasks to employees, keepingthe more challenging – yet stimulating - tasks for themselves. Empowerment will not work unless the authority and decision-making tasks are perceived as meaningful by the employee. Another problem arises when managers not only assign meaningless tasks to their employees but also then expect the employee to continuously consult them for approval. Managers must evaluate their employees’ skills and abilities and determine if the organization’s culture can support an empowerment program before beginning.

6. 10.6. Self-managed work teamsLogically, employee empowerment led to the development of self-managed work teams. This management style delegates authority on making decisions on primary activities of everyday company operations. Self-managed work teams consist of about a dozen people and require minimum supervision. General Motors and Hewlett-Packard use this managerial form is portions of their activities. According to Stephen P. Robbins (2002), one in every five companies uses self-managed work teams. Of course, managers must select a management style that is best suited for them, their department, their subordinates, and finally the organization they work for. The situations managers encounter may require varying management styles depending on a specific assignment, the employees being managed, or the manager’s personality. Management style can ultimately determine the performance outcome of employees and a company’s growth depends on the management styles of its executives. Therefore, in order to determine the most appropriate management style, it is necessary to first review previous results produced as a result of a particular management approach.

For example, Toyota has registered unprecedented growth and success as a result of a radical shift in management policy from an authoritative management style to a uniquely tailored management style called Toyota Production System. This particular system allows employees to exercise their skills independently and utilize tools within their reach to perform their duties and solve problems as they arise. Toyota production system management style has enabled the company to benefit from continued innovation from all categories of its employees from managers to junior staff. (Loney, 2007)

Management positions require a certain degree of authority and therefore managers may often find themselves in leadership positions. However, not all leaders are managers and not all managers are leaders. Managers who possess good leadership skills influence and motivate employees to achieve organizational goals. It is therefore noteworthy to mention that certain leadership styles lend themselves to effective management styles as well.

7. 10.7. Quality and total quality managementQuality and quality management do not share a formal definition.Rather, the concepts may be seen as an



integration of all functions of a business to achieve high quality of products through continuous improvement efforts of all employees. Quality,as an ideal, is focused on the concept of meeting or even surpassing customer expectation, which is then applied to the product and service. Indeed, achieving high quality is an ever changing, or continuous, process. As such, quality management emphasizes the ideas of working constantly toward improved quality. It involves every aspect of the company: processes, environment, and people. The whole workforce from the CEO to the line worker must be involved in a shared commitment to improving quality.

Quality and total quality management (TQM for short) can be defined as directing (managing) the whole (total) production process to produce an excellent (quality) product or service. Quality management differs from other management techniques in the attitude of management toward the product and toward the worker. Older management methods focused on the volume of production and the cost of the product. Quality was controlled by using a detection method (post production inspection), problems were solved by management and management’s role was defined as planning, assigning work, controlling the production. (Mouradian, 2002)

In contrast, quality management is focused on the customer and meeting the customer’s needs. Quality is controlled by prevention, i.e., quality is built in at every stage. Teams solve problems and everyone is responsible for the quality of the product. Management’s role is to delegate, coach, facilitate, and mentor. The major quality management principles are quality, teamwork, and proactive management philosophies for process improvement.

Quality management is not derived from a single idea or person. It is a collection of ideas and has been called by various names and acronyms: TQM, total quality management; CQI, continuous quality improvement; SQC, statistical quality control; TQC, total quality control. However, each of these ideas encompasses the underlying idea of productivity initiatives that increase profit by improving the product.

Although most writers trace the quality movement’s origins to W. Edwards Deming, Joseph M. Juran, and Philip B. Crosby, the roots of quality can be traced even further back, to Frederick Taylor in the 1920s. Taylor is the “father of scientific management.” As manufacturing left the single craftsman’s workshop, companies needed to develop a quality control department. As manufacturing moved into big plants, between the 1920s and the 1950s, the terms and processes of quality engineering and reliability engineering developed. During this time, productivity was emphasized and quality was checked at the end of the line. As industrial plants became larger, post-production checks became more difficult and statistical methods began to be used to control quality. This was called reliability engineering because it moved quality control toward building quality into the design and production of the product. Taylor was the pioneer of these methods. The ideas of W. Edwards Deming, Joseph M. Juran, and Philip B. Crosby had the biggest impact on the development of the quality management movement.

Therefore, only a brief outline will be provided here. Deming relied heavily on ‘statistical process control’ methods, though his philosophy went beyond statistical quality control and encouraged building quality into the product at all stages. He put forward the concept of the quality chain reaction: as quality improves, costs go down and productivity goes up; this leads to more jobs, greater market share, and long-term survival. He stressed worker pride and satisfaction and considered it management’s job to improve the process, not the worker. Quality circles, a central Deming theme, are based on the importance of employees meeting regularly in groups to comprehensively discuss product quality. Deming’s ideas were encapsulated in several important doctrines, including his fourteen points for management, the Deming Cycle, and the Seven Deadly Diseases. (Washbush, 2002)

The Deming Cycle involves five steps: consumer research and planning of the product (plan), producing the product (do), checking the product (check), marketing the product (act), and analyzing how the product is received (analyze.) The Seven Deadly Diseases are:

1. Lack of constancy of purpose to plan products and services

2. Emphasis on short-term profits

3. Personal review systems for managers and management by objectives

4. Job-hopping by managers

5. Using only visible data in decision making

6. Excessive medial costs



7. Excessive costs of liability driven up by lawyers who work on contingency (Deming, 1986)

Joseph M. Juran was another influential quality guru. Like Deming, Juran (1989) emphasized planning, organizing, and controlling. However, he emphasized customer satisfaction more than Deming did and focused on management and technical methods rather than worker satisfaction. Juran developed basic steps that companies must take, however he believed there was a point of diminishing return, a point at which quality goes beyond the consumer needs. For example, if the consumer trades his car in after 80,000 miles, the car need only be built to perform trouble-free for 40,000 miles. Building a better car would drive up costs without delivering the expected product. This is called the Pareto Principle, or the Juran 80/20 rule: 80 percent of the trouble comes from 20 percent of the problems. The rule is named for Vilfredo Pareto, an economist, but it was Juran that applied the idea to management. It can be expressed as: ‘concentrate on the ‘vital few’ sources of problems; don’t be distracted by less important problems.’ Like Deming, Juran developed a number of reinforcing doctrines, including Juran’s trilogy—quality planning, quality control, and quality improvement —and his ten steps to quality improvement:

1. Build awareness of opportunities to improve.

2. Set goals.

3. Organize to reach goals.

4. Provide training.

5. Carry out projects to solve problems.

6. Report progress.

7. Give recognition.

8. Communicate results.

9. Keep score.

10. Maintain momentum by making annual improvement part of the systems and processes of the company. (Juran, 1989)

Philip Crosby, author of Quality Is Free, was the third major quality guru. Crosby emphasized meeting customer requirements by focusing on prevention rather than correction. He claimed that poor quality costs about 20 percent of the revenue; a cost that could be avoided by using good quality practices. Crosby’s method does not dwell on statistical process control and problem-solving techniques that the Deming method uses. He stated that quality is free because prevention will always be lower than the costs of detection, correction, and failure. Looking at the history of quality management, we see several stages of development. The first was quality control, which involved setting up product specifications and then inspecting the product before it leaves the plant. The second state is quality assurance, which involved identifying the quality characteristics and procedures for quantitatively evaluating and controlling them. The next phase is the true total quality control, a term actually coined by Feingenbaum in 1983. At this stage, the quality became a total organization effort. It effected production, profit, human interaction and customer satisfaction. The fourth stage is total quality management. In TQM the customer is the center and quality is an organization-wide effort. (Creech, 1995)

TQM has gained wide acceptance in the United States and quality management principles have had a remarkable influence on every sector of American business, spreading into non-profit organizations and universities.

Indeed, many U.S. companies implemented total quality management systems as far back as the 1980s, in order to be competitive in the global market place. Successes lead these companies to be interested in hiring managers and engineers with some TQM training. This prompted universities to start teaching quality methods. To help universities in this, the University Challenge program was developed by a group of companies that had implemented TQM successfully. Their goal was to encourage universities to commit to integrating TQM in their own operations and courses. Initially eight universities with both business and engineering schools were chosen. Milliken worked with North Carolina State University and Georgia Institute of Technology. IBM worked with Massachusetts Institute of Technology and Rochester Institute of Technology. Motorola worked with Purdue University. Procter & Gamble Company worked with University of Wisconsin at Madison and Tuskegee



University. Xerox worked with Carnegie Mellon. (Creech, 1995)

Work on quality management conceptscontinues into the 21st century. Works such as Process Improvement and Quality Management in the Retail Industry, Quality Management in Construction, and Quality Management in Health Care have appeared in recent years to apply quality management techniques to areas such as retail, construction, healthcare, software development, and more. Quality may no longer be the hot new management idea that it was in the 1980s; however, the quality revolution has succeeded, making quality management techniques a permanent part of the global business world.

8. ReferencesBesterfield, D., C. - Besterfield-Michna, - G.H. Besterfield - M. Besterfield-Sacre(2002): Total Quality Management. 3rd ed. Upper Saddle River, NY: Prentice-Hall.

Cherrington, D.J.(1994): Organizational Behavior: The Management of Individual and Organizational Performance. 2nd ed. Needham Heights, MA: Allyn and Bacon.

Creech, B.(1995): The Five Pillars of TQM. New York: Truman Talley Books/Dutton.

Deming, W.E.(1986): Out of the Crisis. Cambridge, MA: MIT Press.

Goetsch, D.L., - S.B. Davis.(2001): Total Quality Handbook. Upper Saddle River, NJ: Prentice Hall.

Juran, J. M.(1989): Juran on Leadership for Quality. New York: Free Press.

Juran, J. M.(1988): Juran on Planning for Quality. New York: Free Press.

Loney, N. (April 26, 2007): “Toyota: Leading from the Front.” World Business Web Exclusive.http://www.worldbusinesslive.com/Career/Article/653253/toyotaleading-front/.

Matejka, J. K. – R. J. Dunsing – C. McCabe(1999): ‘‘The Empowerment Matrix.’’ Manage 50, No. 2, 14–16.

Mathieu, J. E. – L. L. Gilson – T. M. Ruddy(2006): ‘‘Empowerment and Team Effectiveness: An Empirical Test of an Integrated Model.’’ Journal of Applied Psychology. 9, No. 1, 97–108.

McGregor, D.(1960): The Human Side of Enterprise. New York: McGraw-Hill Book Co..

Mescon, M. H. - C. L. Bovee -J. V. Thill.(2002): Business Today. 10th ed. Upper Saddle River, NJ: Prentice Hall.

Miller, D.– J. Hartwick –I. Le Breton-Miller(2004): ‘‘How to Detect a Management Fad–And Distinguish It from a Classic.’’ Business Horizons 47 No. 4, 7–16.

Mouradian, G.(2002): The Quality Revolution. New York: University of Press of America.

Pop, M.-Pop, D.(2008): ‘‘Types of Managers and Management Styles.’’ Fascicle of Management and Technological Engineering Vol. 7, http://imtuoradea.ro/auo.fmte/ MIE_files/POP%20MIRCEA%201.pdf.

Robbins, S. P.(2002): Essentials of Organizational Behavior. 7th ed. Upper Saddle River, NJ: Prentice Hall.

Strach, P.- A. Everett.(2004): ‘‘Is There Anything Left to Learn from Japanese Companies?’’ SAM Advanced Management Journal 69, No. 3, 4–13.

Waddock, S.– C. Bodwell.(2007): Total Responsibility Management: The Manual. London: Greenleaf Publications.

Washbush, J.B.(2002): ‘‘Deming: A New Philosophy or Another Voice?’’ Management Decision 40, No. 10, 1029–1036.


11. fejezet - 11. Managementchange I.In today's dynamic, diverse and unstable environment, when managers and professionals would look for something constant and stable to grip, the most stable and most consistent stability they can find, is the change itself. We all must recognize the message of ’Nothing is more permanent than change’ and in today’s world only those who can accept and adapt to the accelerated and constantly changing environment will be successful. According to our interpretation the change is nothing more than a continuous adaptation to environmental conditions. The environment mediates the effects and enforcement that make the organisations adapt, behave and produce differently. An organisation can react to the changes in environmental conditions in many different ways. According to management and organisation professional literatures, experts and employees primarily focus on the question of structural changes. The question of changing organisational structure is really a key issue because these changes fundamentally affect the operation of companies. We also have to accept that most changes in the operation and behaviour of the companies have organisational implications as well. From these approaches, it can really be concluded that the most important are the structural changes that aim at changing the organisations, namely the structural changes.

The adaptation to environmental conditions does not always require structural changes. In many cases, only attitude, and thus behavioral changes are sufficient for the adaptation. Changing culture, changes in leadership styles or in leadership methods, or the formation of quality management or marketing policy do not always affect the structure of organisations. Today, the adaptation to a rapidly and continuously changing environment requires many changes from organisations which do not require structural change but they can significantly affect the operation of organisations. However, the change of the operation can enforce organisational structural change. Operation and structure are closely related organisational characteristics, which often move together or at least their interaction is unquestionable. Therefore, it is not appropriate to distinguish between the changes affecting the function and structure because the process of change and its nature are the same.

In the past decades, change management thinking was characterized by the fact that only those changes were interpreted as organisational changes, which occur on the basis of consciousness intervention of the organisation or happened accompanied by such interventions. These so-called "guided organisational changes" assume conscious management activity that is we know why and where we started from and where we want to arrive. Change management theories, and methods, almost without exception remain within the topics of ’guided organisational change’. They assume a stable, clear and transparent business environment. All features can be measured, predicted and modeled. The necessity of the change can be foreseen based on a simple, cool discretion of the internal and external factors causing the change. The process of change can be planned, controlled, namely it is controllable (Bakacsi, 2001).

According to the traditional management approach, organisational change can be regarded as ’directed change’, so managerial involvement is assumed. The recognition of the guided nature of organisational changes is difficult if the change is not initiated by the management. ‘Of course, that does not mean that the leadership could not use the changes already in progress for its own purposes.’ Successful leaders often claim the processes originally started independently with their own initiatives; thus, the processes become managed ones. According to this approach, the organisational changes in each case are to be understood as controlled changes because the term ’organisational change’ itself refers to the active participation of leadership (Kiss, 1991).

According to Pataki’s (2004) work (which is based on Levy, 1986; Smith, 1982; Watzlawick et al., 1974, 1990), two basic types of changes can be distinguished. (1) The morphostatic (first degree), change takes place within the frame of the given system while the system itself remains unchanged. A good example is the 2012 Hungarian NEA grants, which are intended to assist the operation of NGOs and can be submitted in an electronic form. The form and the content are changed to a lesser extent from year to year, but the change remains within the system and the tender system itself does not change. (2) The morphogenetic (second degree) change is the change of the system itself. The support of the NGOs is also a good example here. In 2003, the support system of NGO operation was fully revised by the new NGO base program and it made the organisations consider their private operation. Change management is a professional field dealing with the management of the second degree (morphogenetic) changes (MINK et al., 1993).

According to Conner (1993), three types of changes can be possible:

• Micro-changes which affect me, my partner, the family and close friends


11. Managementchange I.

• Organisational changes which occur at workplaces or at any other institutions involved in my life (e.g. religious communities)

• Macro changes, for example in constituencies or regions

Many things can change in the life of organisations, such as the organisational form, strategy, hierarchy, operational profile, human resources, etc. Thus, it is difficult to exhaust the previous dimensions of change. While the dimension described by Pataki (2004) is a comprehensive one, Conner’s dimension (1993) is relevant due to the involvement of change.

Based on our own experience and the approach in the literature, we consider change to be a dynamic process in which the organisations adapt to environmental conditions. Therefore, they consciously transform the processes of the organisation.

Change is a process in which the phases can be clearly defined and distinguished (Figure 1). Each change is preceded by a relatively stable state which can also be described as the starting position. The initial state can be interpreted via Lewin’s force field analysis which evaluates the impacts of the blocking and generating factors. This state is characterized by stability and balance, in the sense that the forces supporting and causing a change are in balance with the impediments blocking change. These factors, forces or conditions causing and blocking change can be very different and can be originated both from outside or inside the organisation.

11.1. ábra - Figure 1: The process of change(based on Lewin(1975))

When this balanced state is disrupted for some reason, the initial stable state becomes unstable, or loosened, since the factors generating change are intensified or the blocking forces are weakened. Then the process enters the next phase namely the phase of change (Bakacsi, 2001). In this phase, there is no stability in the organisation. There is a lot of uncertainty because the previous stable state loosened, changed, but the result of the change is still unknown and uncertain.

The state created as a result of the change can be called a future or target state. It is a stable equilibrium state created after the consolidation and strengthening of the result.

Nadler (1988) determined some criteria stating the change can be considered successful if as much as possible of the criteria is fulfilled:

• The organisation got from its previous state to the desired new state, so it managed to accomplish the planned changes.

• The operation of the organisation in the new state meets the requirements, so it operates in the planned way.

• The transition happened without excessive expenditures for the whole organization

• The transition happened without excessive expenditures for some of the members

The conditions of successful change are symbolically expressed by some researchers in the form of formula. One of the best-known formulas is the Gleicher-formula (Internet 1). The original formula refined is the following (Dannemiller-Jacobs, 1992):



D*V*F>R

The variables of this formula are the following:

• D (dissatisfaction): dissatisfaction with the current situation

• V (vision): vision about what is possible

• F (first): actual, concrete steps towards implementation of the vision

• R (resistance): According to Pataki (2004) it also means what it takes to change.

If the product of multiplication of the three factors is higher than the R, the change is possible and feasible. If any of the factors are missing or low, it becomes difficult to overcome the resistance and cost.

The management tasks are clearly assigned to the phases of change process.

• The equilibrium state should be loosened and destabilized to create change in the steady state. It can be spontaneous, not controlled but it can be consciously managed as well. Either the barriers have to be weakened or the supporting factors have to be strengthened in the case of consciously directed change management. Usually the steady state can be characterized by stability regarding the literature. However, the destabilizing processes have already started in the background. The destabilization is created either by spontaneous effects or as a result of conscious managerial intervention. The organisation gets from a stable state to an unstable stage in this phase.

• After loosening, the actual change will be implemented in the temporary state. The riskiest part of the process is the unstable temporary state, which loosing after current stage, destabilized, which is the realization of the change itself. In this phase, the organisation members are confronted with their situation within the organisation, role and their tasks become uncertain; their previously stable, secure environment become unstable. The demand for information is increasing. Everybody wants to know everything. The information ’hunger’ grows especially towards data regarding the future situation and state. Communication problems, conflicts of interest, and other conflicts can surface. The organisation's members have expectations for the changes because of their personality. As soon as they realize that the change also concerns them, they confront the problem of change described above. Resistance will develop that is the resistant against the changes.

• The results of the changes should be consolidated, namely the change is stabilized through the consolidation and the stable state is established again.

Several reasons for the resistance can be possible, which are divided into two large groups in the literature: personal and organisational.

The personal motivational resistance is originated from the behavioral, cultural and psychological factors. The determined element of the human behavior, and attitude of fear from the new, is namely the so-called ‘individual homeostatic orientation’. The uncertainty means avoidance because of such attachment to the usual state that the sudden change can lead to mental illness (e.g. Rain Man). The organisational culture also stabilizes the structure by the organisational members who are also emotionally committed to the established traditions, events, contacts, ceremonies etc. One of the most important psychological factors is the fear of the unknown, the avoidance of the uncertain and the effort to maintain the status quo, which is otherwise also called homeostatic attitude.

The known, accepted and routine state of organisational life and the actions in them, needs less mental and physical energy than the transformation into the new. Private life and our organisational life are filled up with habits (routines, programmed actions) to moderate the complexity around us. The change involves uncertainty and risk of loss of the already acquired, "guests'" values. The people do consciously and subconsciously attempt to eliminate this risk. The change may threaten the financial interests. The new procedures, or routines, which are different from the previous can create such fear in us that we will not be able to meet the new requirements thus our performance reduces the income dependant on performance.

The resistance is even clearer if the change threatens not only the familiar but also the job itself. The risk of losing a job, the risk of dismissal and livelihood can lead to the strongest resistance: here the full armory of the resistance may apper from blocking the work, to a strike.



Literary sources handle with high priority such characteristics of organisational members (among personal reasons of the resistance) that everyone detects the phenomena of the environment in different ways. The selective perception is essentially a subconscious reaction. We tend to reject those signs, which question the correctness of our behavior and activity. However, we tend to over evaluate those confirming signals that support the correctness of followed behavior. As a result, an assessment may develop that there is really no need to change.

One of the personal reasons of resistance generally known is the so-called ’outsider effect’ which means that ’it was found out by you, so you just do it, it is none of my business’. This same behavior is often observed when external experts participate in the process of change. In these cases, prejudices can often appear against external experts, who make the cooperation with them impossible.

In addition, several other behavioral and attitude forms can be a base of resistance of organisational members. The dogmatism, the convenience and the lack of confidence are against the success of the changes.

Not only is the individual homeostatic oriented: the organisations also strive to maintain its state, which can be also called organisational conservatism. One result of these facts is often that the good-intention managerial ideas turn reversed and they trigger the resistance of parties.

The leaders initiating change and other affected organisational members have several attitudes to change (includes those affected, not initiating leaders). Since the attitude can be traced back to several new forms of information, perception and several emotional identifications with change, these effects can be difficult to overcome even with high awareness.

Beside personal points, the organisational factors are also important. The most important organisational reason of resistance may be the anxiety to lose power position. The resource-allocation scheme of the organisation is also changed by changes: the number of employees reducing, the proportion of the budget changing, the reduction of previous sources, which often inherent the changes, also violate direct interest. It can also lead to further resistance that the change can result in the questioning of the existing of a certain profession or an organisational department. It can also result further resistance if the stakeholders sense the planned change to be limited. Organisations are interdependent systems where the implemented changes in a department or subsystem affect other organisational department or subsystems. If changes are contrary to the organisational culture, we should take into serious consideration the restraining effect of cultural mediums which are rarely changeable, and only in the long term. Therefore, culture as an organizational factor should not be underestimated in generating resistance.

11.2. ábra - Figure 2.: Change to act (based on Internet 1)

The organisational structure is perhaps one of the strongest organisation braces that operates against resistance. The organisational conservatism is an accepted and well-understood concept among professionals, and researchers dealing with this theme. It is based on a relation network developed within an organisation, which forms between the organisational departments and members during the operation. This network stabilizes the organisation members’ status together with the previously formed professional hierarchy. Therefore, they show very strong resistance effects. Informal agreements occur within all organisations, which were recognised and accepted by organisational members in previous operation. If these agreements change, they become factors



generating resistance.

Reviewing the organisational causes of resistance, we should notice that the mentioned factors are precisely those ones, which are also in the focus of the organisational games and political movements. It is no wonder that organisational changes are accompanied by an active power, and political action (Figure 2.).

One of the key questions of change management is how to successfully handle (overcome) the resistance, which appears almost inevitable against change. In particular, it would ease the transformation in the case of the planned changes, and management initiated and directed changes would make the resistance as be low as possible.

Also, it can result that the more smoothly the conversion takes place the more flexible and more efficient the organisation becomes. The larger the degree of resistance the greater the degree of loss rate. In the change process directed by the management there are the possibilities to use conscious managerial techniques (Figure 3.).

11.3. ábra - Figure 3.: The elements of change management (based on Internet 1)

Kotter-Sclesinger’s methodological proposal (1979) in connection with counteraction of resistance summarises it an informative way:

• Training, communication. We can enable people to understand and grow accepting of change by appropriate training and information giving.

• Participation, involvement. Their ability will be usable by the involvement of the parties; they can also become committed to the management.

• Help, support. The support of the parties can give emotional help mainly regarding the adoption of the unfamiliar things.

• Negotiation, compromise. In the case of balance of power it may be beneficial where the game rules of bargaining can play role.

• Manupulation, cooptation. It practically means to influence people to behave a way defined by us.

• Open or implicit enforcement. This is an arbitrary tool of the institutionalization of change in the case of strict hierarchy, emergency, etc.

1. References:Bakacsi Gy.(2001): Szervezeti magatartás és vezetés. KJK-Kerszöv Jogi és Üzleti Kiadó, Budapest.

Conner, D. R. (1993): Managing at the Speed of Change. Villard Books, New York.



Dannemiller, K. D., and Jacobs, R. W.(1992): Changing the way organizations change: A revolution of common sense. The Journal Of Applied Behavioral Science, 28(4), 1992.

Kiss, L. (1991): Integrált termelési – készletezési rendszerek. In: Vezetés-szervezés. Szerk.: Dobák M. Aula Kiadó, Budapest.

Kotter, J. P. – Schlesinger, L. A. (1979): Choosing Strategies for Change (HarvardBusiness Review, Vol. 57, No. 2, March-April.

Kotter, J. P.-Schlessinger, L. A. (1992): Choosing Strategies for Change. In: Manging People and Organization. Ed.: Gabarro, J. J., Harvard Business School Press, Boston, MA.

Levy, A. (1986): Second-Order Planned Change: Definition and Conceptualization. Organizational Dynamics, Summer.

Lewin, K.(1975): Csoportdinamika. Közgazdasági és Jogi Könyvkiadó, Budapest, 1975.

Mink, O. G. – Esterhuysen, P. W. – Mink, B. P. – Owen, K. Q. (1993): Change at Work. Jossey-Bass, San Francisco, California.

Nadler, D. A. (1988): Concepts for the Management of Organizational Change – In:Tushman, M. L. – Moore, W. L. (eds.): Readings in the Management of Innovation 2nd ed., Ballinger Publishing Co., Cambridge, Massachusetts.

Pataki B.(2004): Változásmenedzsment oktatási segédlet. Budapesti Műszaki és Gazdaságtudományi Egyetem, Budapest, 2004.

Pataki B. – Németh B. – Bárkányi M. – Koczka T.(1998): Observations on Benchmarking in Hungary (European Management Journal, Vol. 16, Issue 4, 1998.

Smith, K. K. (1982): Philosophical Problems in Thinking about Organizational Change– In: Goodman, P. S. and Associates: Change in Organizations. Jossey-Bass, San Francisco, California.

Watzlawick, P. – Weakland, J. H. – Fisch, R. (1974, 1990): Change. W. W. Norton &Co. Inc.

Internet1:http://www.innotrain-it.eu/c/document_library/get_file?p_l_id=34803&folderId=34465&name=DLFE-4407.swf (accessed on 20 March, 2013).


12. fejezet - 12. Managing change II.The organisation can react in a various number of ways to the changes of the environmental condition. As shown earlier, the organisational structure, the technology, processes, quality systems, the organisational culture, the organisational behavior, production structure, hierarchy and power relations can change. These processes may affect the organisations in different degrees. The changes may extend to the entire organisation or activity, but it can be limited to only one part of the organisation or its partial activities. There can be numerous ways from insignificant to relevant in the degree of difference between current and future states. The irreversibility of change means that the transformations are durable; the original state can not be restored. In the case of changes in which the original state can be restored, those, which are reversible, do not represent significant or substantial deviation from the current situation (Miller-Frisen, 1984).

The selection of change management methods and tactics can be essential to assess the degree of the resistance appearing against change and the possibility of its treatment. The higher the degree of resistance, the harder it becomes to handle with authority tools. In this case, it is more difficult for the management to reduce the degree of resistance by several change management methods. The strength and degree of the resistance are affected by many factors. The examination of this is very difficult because there are no well-measured parameters. A private research of this carried out among leaders wanted to know which are the factors that prevent, and block attempted changes by leaders. These preventing factors are together the personal or organisational reasons of the resistance (Figure 1).

The evaluation of the interviewees shows that the triggering of resistance primarily plays a decisive role in the organisation members’s sense of security, namely the satisfaction of security becomes endangered. The possibility of the change in the work opportunities, personal status and financial changes show that the most preventing factor overall is the developed sense of insecurity in the organisation members. But the insistence in the familiar, and the old (which is the next in the rankings) is also related to our feeling of security. These assessments refer to the different values and shows the fear from the technologies actually does not play a significant role in the resistance against changes.

12.1. ábra - Figure 1: The classification of the preventing factors of change (own examination)

The strength of the resistance depends largely on the authority position of the initiator versus the resistance. The greater the power of initiative, the easier it is to suppress the resistance, because the smaller its power compared to the authority. It is then more necessary to apply tactics based on more patient persuasion or manipulation from the authority position of the initiator.

12.2. ábra - Figure 2: Activity in the process of change (based on Kotter (1999))


12. Managing change II.

Figure 2. shows how the organisational members' activity and behaviour in the process of changes are developing. When the organisation members are confronted with the fact that change is inevitable, and their situation will be also effected by modifications, this can create several reactions (1) the first reaction is ’stunned helplessness.’ The greater degree of the change affecting the person, the greater the paralysis. From the passive paralysis (2) the active protest gradually develops, the point of which is the denial of the change. This activity does not purely include the protest itself, but any activities by which the members of the organisation prevent the change process, when the initial state and process are attempting to get into a more beneficial situation. After the protest, the activity of resistance decreases (3) the "resisters" admit that change is inevitable and resign their efforts. The lowest level of activity (4) is the depression, when the organisational members accept the fact of change, there is no worth for the situation before change; they do not want the new situation yet. The activity (5) is gradually increasing in the phase of testing (6), the conscious adaptation, and the incorporation (7). At the same time, however organisational resistance does not suddenly disappear. The efforts of reversal remain and increase to a lesser extent, than acceptance to the conscious incorporation.

The above mentioned version of the resistance and activity the leaders should keep in mind is shown all along by the choice of their management methods and creation of their leader valued judgments. The managerial behavior and tactics that can be recommended is understanding, patience, constant communication and providing information in the state of paralysis and protest. It is appropriate to initiate negotiations (particularly with the informal director of the resistance and other key determined personalities) in order to reduce the resistance in the state of paralysis. It is a basic expectation to keep bargains that are made because it can significantly affect the later reversal activity of efforts. Successful managerial tactics can be the integration of these such persons into the process of change. They can become initiates towards, and committed to support the change.

The members of the organisation try to be brought out from the passive and depression state of the acceptance and resignation, towards the direction of the trial stage as soon as possible. The wide range of benefits of good communication and application, along with various motivational tools can help to achieve above mentioned progression. Some certain information manipulation is allowed, such as the concealment of negative effects, directional transmission of information, and timing of information. However, they are dangerous, because if the manipulations can be seen in the early state of the change, it can lead to an intensified resistance and protest. Especially when the hidden negative effects occur sooner than the positive effects of change. Therefore, negative effects always get greater importance as a result of the resistance. The members of the organisation can see preliminary concerns to concentrate on while the positive effects are devalued because they are treated with reservation, as transient or accident. In the case of information tactics, however, those are temporarily very successful; but we must treat them carefully, because it can easily result in losing credibility of the leaders. This, coupled with distrust can even result crisis of the management. False information must not be used for the handle of resistance because it can lead to the devaluation and impairment of the management, but they have very adverse effects on the organisational culture and behaviour as well.

Exemplary success should be provided and the members should be supported by positive motivation to move forward in the state of trying. The huge success in the short term should be given wide publicity, recognition and rewards; it is still permitted to a certain extent that the results are over evaluated. Whilst in this way we must treat it as moderate, because the restoration of the correct values may conflict difficulties in the consolidated state. The conscious participation is a high-activity phase but it is appropriate to deepen the new requirements. Norms and opportunities are necessary at trainings and courses to integrate into and identify within the new



situation. In order to gain a greater commitment, supporting managerial behavior and application of additional motivational tools are needed.

The source of the reversal efforts in the resistance of the organisational members (who were unsuccessfully in the trials and incorporation of the change) strengthens protest again and they become the supporters of the ongoing reversal efforts. Management is responsible for detecting and handling the cause of this; moreover providing new possibilities and support helping the new internal initiations. Success of other people represents motivation for others to a certain extent, but the differences strengthen the resistance beyond a boundary.

The process of change in the organisational members, employees and managers can take up different roles. There are several structures of well-known roles especially in connection with social psychological studies (e.g. Belbin, Veres et al., 2006). Conner (1993), an American expert in the field of change management, sorted the actors into the following four categories:

1. The sponsor is the person or group who has the necessary power to legitimize, approve and sanction the change. She determines the sequence of steps, presents the new priorities, supports to reach success. She is responsible for the creating the conditions, and the exact compliance of deadline and budget.

2. The agent is the person or group who is responsible for practically carrying out the change. Her success is dependent on the skills of problem analysis, design, and implementation. According to Kocsis (1994), the agent is actually considered to be a change manager, whose main task is to recognize the role of individuals and groups within the organisation in the change process. She has to persuade the concerned parties that change initiated by her is desirable and necessary; otherwise the plans are not to be implemented.

3. The target is a person or group who has to change. She is in the focus of change efforts. She has to be trained and must be involved in the implementation process, thus she will be vital to achieve short and long-term success.

4. The advocate a person or group who want to change, but has no power. As a proposer must obtain the understanding and support of the sponsor who has sufficient power and decision-making power. In the absence of these, her suggestions, ideas, however good they can be, are doomed to fail.

It is important to note that while there is an advocate, other three roles do not exist. When there is a sponsor, who will the head of the desired changes, the role of the advocate ceases to exist automatically.

The anomalies in connection with roles are presented by Pataki (2004):

• The phenomenon "wolf in the wardrobe" occurs in the relationship between the agent and the target. It is important that the agents always try to think about the target's head and try to start from his/her comparison point.

• The phenomenon "black hole" (Figure 3.) occurs in the relationship between the sponsor and agent. The person acting as a black hole swallows any top-down change efforts that will not arrive to the organisation’s lower level. A black hole is formed when the chain of sponsor-agent is lost somewhere because a manager does not support the announced changes. Pataki shows this in the following way through Conner’s figure (1993):

12.3. ábra - Figure 3.: The black hole effect (based on Conner (1993))



The change is a complex organisational process of which numerous features can be interpreted. As a process, the determining phase is the change itself, in which the key organisational characteristics are actually transformed. But the modification is the static approach of the change. It means a state which was taken out of context for the moment but this state has a primary and a final stage as well. This way it will be a process. The management tasks are not only the modification of the old one and the introduction of the new one from a managerial view, but also the preparing of openingand the closing of the process.

Several change management tactics are recognized from the professional literature. Zaltman – Duncan (1977) primarly dealt with the issues of behavioral change management. Four change management strategies were developed based on their investigations: the facilitative, the reducative, the persuasive and the power strategy.

• The facilitative strategy should be used when the changes are of internal origins. The changes are initiated by the members of the organisation or perhaps its departments. The task of the management is to support and facilitate the change particularly when the change coincides with the organisation’s goal and the ideas of the management.

• The application of the reducative is useful if there are any conscious, knowledge and approach barriers to changes ensuring the development of the organisation. The ’information hunger’ of the organisation members may be the success of the reducative strategy. In this case, it is appropriate to "take advantage" of the staff's interest with organized trainings.

• The persuasive strategy is when leaders affect the members of the organisation with different methods and strive to reduce the degree of resistance and thus realize the change.

• The power strategy is based on coercion. The source of managerial power may originate from the personality and position of the leader. The power coming from the personality of the leader may have a role in the enforcement of change. The power of expert comes from the knowledge of the leader. The prestige, which is achieved by the leaders’ professional preparation is such a tool in the management of the changes which increases the trust of employees and it can result in the reduction of the resistance. The charismatic power coming from the personality of the leader may be effective in the enforcement of managerial will.

Kotter (1999) when developing change management methods analyzes the mistakes that organisations committed during the management of change. These are considered serious errors, which led to the failure of the changes.

„By any objective measure, the amount of significant, often traumatic, change in organizations has grown tremendously over the past two decades. Although some people predict that most of the reengineering, restrategizing, mergers, downsizing, quality efforts, and cultural renewal project will soon disappear, I think it is highly unlikely. Powerful macroeconomic forces are at work here, and these forces may grow even stronger over the next few decades. As a result, more and more organizations will be pushed to reduce costs, improve the quality of products and services, locate new opportunities for growth and increase the productivity. To date, major change efforts have helped some organizations adapt significantly to shifting conditions, have improved the competitive standing of others, and have positioned a few for a far better future. But in too many situations the improvements have been disappointing and the carnage has been appalling, with wasted resources and burned-out, scared or frustrated employees”.

Kotter developed an 8 step method (Figure 4.) based on the analysation of mistakes occurring in the change. The method has eight steps. Each of them can be identify as one corresponding to the eight mistakes threatening transformation.

12.4. ábra - Figure 4.: Kotter’s 8 step method (based on Kotter (1999))



1. Creating a sense of urgency: the urgency and importance are a known managerial tactic, which means a type of coercion. The slogans ’we are at the last minute’ or ’the boat away’ or ’we are in the 24 hours' are the urging of the adoption of change. If we do not change there will be consequences. These are the points of the perception that change is urgent.

2. Creating the team directing the change: it is equal to coalition building. It is a coalition between those who are committed to the change and they are professionally suitable for its direction. It is a well-known method for politics.

3. The elaboration of the vision and strategy is the task and obligation of the top management. All the changes will be doomed if the managers can not formulate an attractive vision and they can not show a pre-formulated strategic vision.

4. Good communication of the vision in which the emphasis is on ’good’ is communication. It is a tactic which mainly highlights positive consequences of the change. It can become a danger when first the negative effects are revealed.

5. The empowerment of employees means that the organisational members (key factors) are put in a position during the change, namely we give the power to allow them that they have opportunity to contribute to the implementation of changes. The empowerment and the delegation also means alongside the transferring of tasks and rights obligations and liabilities as well.

6. Achievement of short-terms success and quicker victories. In particular, the results achieved in the changed system may have really important motivation effect in the stage of testing.

7. The consolidation of results. The over communication of the part results is also allowed in the stage of testing. However, the emphasis is on consolidation and realistic assessments are required in actual operation.

8. The institutionalization of the new solutions, which aims to restore stability.

In the Figure 5., the results of a previous examination carried out among managers can be seen. The study is focused on how the questioned managers classified the change management methods. The research was a built in questionnaire; the interviewees had to evaluate from 1 to 5 the given methods based on the effectiveness.

12.5. ábra - Figure 5.: Evaluation of change management methods (own examination)



The results are presented by the ranking of evaluation in figure 6. The most efficient change management methods are the communication, the participation, along with involvement and the assistance by the interviewees. We should determine based on the classifications that negotiation and the information giving have an important role in the performance of processes. The smallest role is attributed for the bribery and the manipulation. The results show that respondents clearly attribute the most important role as the communication and the information. As we have already shown at the characteristics of the change, the base for the successful change management is to satisfy the ’information hunger’. The participation and involvement are in the second place in the ranking. It is about the forming of the insider feeling. Such a message is transmitted to persons who can take part in the progress, that the leaders relies on them and they are professionally qualified to understand changes.

In should be especially applied for those who are really active. This is such a management tactic, which can switch or even make the subordinates committed to change. Enforcement of power has been considered to be of really low effectiveness in value judgments. The evaluations in connection with bribery and manipulation shows that these management methods are not efficient. It is possible that the respondents answered according to the environmental, social norms and expectations in this case. The fact is that these solutions were at the end of the rankings. The control study of this evaluation can be the examination about how often the leaders apply this method. Due to those, control studies, such failures can be detected which are made by leaders during the change management.

According to Conner (1992), the efforts made towards change lead often to failure. The most typical reasons of this fact are as follows:

• Logistical and economic problems

• There is no need for it any longer

• General strategic goals have changed

• The sponsors of change left their positions

Conner’s group collects the reasons leading to failure regarding other approaches; but it shows that other authors also have to deal with the failure of change management as well.

1. References:Belbin, M. (1998): A team, avagy az együttműködő csoport. SHL Hungary Kft, Budapest.

Conner, D. R. (1993): Managing at the Speed of Change (Villard Books, New York).

Kocsis J.(1994): Változások menedzselése. Műszaki Könyvkiadó, Budapest, 1994.

Kotter, J. P.(1999): A változások irányítása. Kossuth Kiadó, Budapest.



Miller, D. – Friesen, Ph. H.(1984): Organisation: A Quantum View, Prentice Hall, Englewood Cliffs, N. J.

Pataki B.(2004): Változásmenedzsment oktatási segédlet. Budapesti Műszaki és Gazdaságtudományi Egyetem, Budapest.

Veres Z. – Hoffman M. – Kozák Á. (2006): Bevezetés a piackutatásba. Akadémiai Kiadó Zrt, Budapest.

Zaltman, G. – Duncken, R.(1977): Strategies for Planned Change. Wiley and Sons, New York.


13. fejezet - 13. Managerial stylesAccording to Byrnes (2009) management and leadership styles have a profound impact on the way an organization functions. When we use the word style, most of us think style is a particular way as we do something. When we say he has a „hands-on management style” we are describing someone who is very involved in the details and the specific tasks involved in completing a project or activity. Naturally, there are as many different ways to run an organization as there are people in this world. Management may also be considered as an art, the basic principles of which may be learnt (Berde-Láczay, 2005). The science of management was born and started to develop when first researchers experimentally justified that there are differences in the performance and success of two organizations operating with similar backgrounds and conditions, and the reason for that is the difference in management (Cseh-Szombathy-Ferge, 1968). While classic researchers (such as Taylor (1911) and Fayol (1918) defined such basic principles, which were to be valid for all industrial organizations, contingency theory (contingency in this understanding means possible, accidental, not predictable event) suggests that there is not such an organizational model considering structure and operation, which would be suitable for all kinds of environmental circumstances and conditions. The term mainly refers to uncertainty and a strong dependency of organizations on conditions. Latest system theories revealed that organizations may be considered as socio-technical systems, where there is a mutual relationship between the social and technical variables of an organization. This may also mean that lower managerial levels’ participation should be assured in the solution of organizational problems and openness and trust should be maintained between individuals and groups in the organizations (Scleicher, 1981). It also raises the question of the organizational system (Burns-Stalker, 1962):

• mechanistic systems, where people do their job by the upper level guidelines and decisions

• organistic systems, where people of different level frequently meet, and it has a consultation nature instead of direct orders.

Managerial style is the behavior sample of the manager perceived by others; it is manifested in words and actions (Baracskai et al, 1999). Managerial style on one hand may be interpreted as relationship between the manager and the subordinates, and may also be understood as behavior, reaction and treatment of laborers depending on the manager’s personality on the other hand. Managerial style is conduct reflecting individuality, which originates from the managerial personality, it is mainly conscious this is why it is hard to regulate. Managerial style is the way of practicing authority and includes such collection of leverages and methods, by which managers influence workmates (Berde-Láczay, 2005).

The style itself obviously is determined by numerous factors beside the personality. These factors may be:

• professional knowledge, qualification, experience

• type of the organization

• relationship between manager and her subordinates (Pallai, 2010).

Managerial work is largely dominated by his personality and style. Considering personality, two well-separated styles may be defined:

• One is the so called autocratic management, which means one-man management. In this case, the manager himself makes his decision, give definite orders he controls, punishes and reward.

• The other is democratic managerial style, which means the wider involvement of corporate members into the decision-making together with the managerial process itself.

Qualification influences the managerial style by the following way. The higher qualification subordinates have the more democratic style what they require. The less qualification they have, the more effective autocratic managerial style will be. The situation regarding the operation and effectiveness of the organization may be favorable or unfavorable. In a favorable situation, managerial style may move towards a more democratic direction, until in less favorable situation, such as crisis, emergency or bankruptcy a more autocratic direction should be justified.


13. Managerial styles

The nature, activity of the organization may also determine the applicable managerial style. In a more autocratic military, semi military or other hierarchal established structures (customs and finance guards, post, railway, etc.) autocratic style is advisable, since this is corresponding with the nature of the structure. Considering more democratic organizations structural elements are such (universities, colleges, municipalities) that decision-making is done by group or plenum. Democratic managerial style here is harmonizing with the organization itself.

The relationship between the manager and the laborers may also be a factor influencing the style in a manner that the internal connection may solely determine applicable managerial style. When the relationship is indirect, friendly, informal, than a more democratic style may be applied. When this relationship is formal, official, distant, than we may move towards a more autocratic way. This latest form of relationship otherwise provides a larger space to move for the manager, since formal, impartial relationships may be removable towards a more indirect, colleague-like direction, while it is not possible conversely. Autocratic style may be tendered and turned intro a democratic or a liberal direction, but it does not work backward.

Two trends may be identified considering managerial styles by Bakacsi (2004)

• decision centered managerial styles

• personality centered managerial styles

Novel approaches add a supplemental trend: this is the contingency leadership model

1. 13.1. Decision centered managerial stylesThose theories may be considered decision centered, which classify managerial styles on the basis of whether subordinates are allowed in decision-making. The ratio of participation may be understood differently, mainly by the steps in the transition between autocratic and democratic styles (Berde-Láczay, 2005). Table 1 illustrates the different types of classifications.

13.1. ábra - Table 1: Decision centered managerial styles (based on Berde-Láczay(2005)).

One of the most frequently known style is in relationship with the American-German psychologist Lewin et al. (1975).

• Authoritarian (autocratic) managerial style. The basis for that is the strict hierarchal relationship between manager and the subordinates, where the authority of the manager means power and consequently validated personal responsibility. The manager leads with authority leverages, such as order and commands. He does not tolerate compromises; decisions are made with no respect to the opinion and agree of the laborers. It also means the deprivation of subordinates from their initiations. When the manager is present, constructive work performance is higher, but it is really low when he is not present. Although it makes the management a clear and visible system, it neglects self-realization of subordinates, provides an unfavorable motivation, decreases responsibility of subordinates and prevents the system from having a good labor atmosphere. The subordinates, mainly those with high level capacity but are neglected will definitely leave the company and joint the competitors. On the other hand, managers will do such second level jobs (which may be better realized by subordinates) instead of using surplus time accessed by new processes to creative activities.



• The democratic managerial style. It acknowledges the social equality of managers and subordinates. The basis for that is the appreciation of subordinates, their knowledge, experience and the trust towards cooperation skills. The manager himself develops his point of view by listening to the laborers, and tries to achieve a promotional agree of them. He constantly informs subordinates about questions affecting them. Groups are promoted to develop opinions and suggestions and managers aims to realize them. Self-realization is enabled and also judgment is available. Laborers consider the manager as one of them (primus inter pares). Work performance is balanced both when the manager is in and out (but compared to the former one when he is in it is smaller). Sometimes it is typically true that working is better under democratic atmosphere but the performance is lower. One of the typical problems is the presence of debates which may take even for a long time. Researcher has found that group members have favored these kinds of managers, and liberal was still seemed better for them than the autocratic ones independently from the person, who has filled in the role.

• Liberal (laissez faire) managerial style. The point of it is the non-interference. The direction of subordinates is minimal. It practically means the denial of management. It enables the processes to flow freely. Direction, coordination is minimal. Managers usually superficially describe activities and do not aim duties. Its application is only advisable when really high capacity work and only for time, until this style do not result in planlessness, indiscipline, disturbances, etc.

The model of Likert (1974) may also be considered as a decision centered managerial style. To describe managerial styles the researcher has developed a four degree typology-these mean four systems. The single factor of the differentiation of the four types of systems is the extent of subordinate participation. The two extreme types correspond with the autocratic and democratic styles defined by Lewin et al., (1975), but their names differ. The two transitional types are the benevolent-authoritative and consultative systems. Details of the 4 systems are the following:

• Exploitive-authoritative system. The autocratic manager shows little trust towards the subordinates usually applies threat, punishment and rarely rewards, downward communication is typical, decision making and control are strongly centralized.

• Benevolent-authoritative system. This kind of manager has some trust in subordinates, usually rewards and rarely punishes, upward communication is operated and sometimes opinions, ideas of the laborer are awaited. Some kinds of decision-making are delegated but also strongly controlled.

• Consultative. The consultative manager - although not fully - trust in subordinates, their opinions, ideas are used constructively, the way of motivation is typically reward and rarely punishment, upward and downward communicational channels are operated. Considering comprehensive decisions plenum principle prevails, the organization itself is characterized by diverse consultation practice.

• Participative-group system. This system provides a complete trust in subordinates, the manager constantly requires opinions and these are constructively applied. The way of motivation is the participation of group members in defining objectives or performance appraisal beside financial reward.

Tannenbaum-Schmidt (1996) have described and understood gently in a seven degree scale the participation of subordinates in authority and the extent of freedom of activity. The two extreme types are the manager and the laborer centered managerial styles. Considering decision-making they examine who defines the problem, who suggests solution, who comments suggestions, who determines the rules of decision making and who is the final one to decide.

13.2. ábra - Figure 1.The Tannenbaum-Schmidt model (based on Internet 1).



2. 13.2. Personality centered managerial stylesThose theories are considered personality centered, the basic criteria of which are the personality, marks and direction of attention of the manager. Manager may concentrate on the task, the performance of the groups or the development of the good relationship with the colleagues (Table 2):

13.3. ábra - Table 2: The classification of managerial styles by the direction of managerial attention (based on Berde-Láczay(2005)).

Considering the Michigan University model, researchers have investigated the relationship between supervisory behavior and employee productivity and satisfaction. They have identified two managerial styles:

• Production-Centered supervisors strictly observe the work of subordinates, they prescribe how others should work and mainly show interest in performance. Strongly supervise and try to control performance. These kinds of manager mainly apply legal, rewarding and enforcing forms of authority

• Employee centered managers usually spend more time on caring employees, shows interest in them and practice less punishment. The main nature is the aspiration to develop a cohesive group. The well-being, the personal participation and development of employees are regarded as most important factors of the style. Decisional authority is divided in the group and control is less strong (Griffin, 1984). These two styles exclude each other and employee centered style is usually more effective.

In the Ohio University model researchers have experimentally differentiated the natures of the two managerial styles. According to Warrick (1981):

• Consideration may be explained as behaviors by means of which the leader establishes rapport with his or her employees, two-way communication is operated, mutual respect and understanding characterizes the internal relationship. It includes behavior indicating trust and warmth between the supervisor and his or her group and emphasizes concern for group members’ needs.

• Initiating Structure may be understood as such behavior by means of which the leader defines or facilitates/promotes group interaction toward goal attainment. The leader does this by planning, scheduling,



criticizing, initiating ideas, organizing the work, defining member roles, assigning tasks, and pushing for production

The Blake-Mouton (1978) managerial grid also applies the approach of production and employee focus. The two extremes are the concern of production and concern of people. The term concern for, as used in the grid, is a theoretical variable reflecting basic attitudes or styles of control. The horizontal axis of the management grid shows concern for production and the vertical axis represents concern for mature and healthy relations among those engaged in production. Each axis is on a 1 to 9 point scale, with 1 representing a minimum interest or concern and 9 a maximum concern. Inside, five basic managerial styles may be identified:

13.4. ábra - Figure 2. The managerial grid (based on Internet 2).

The explanation of the 5 typical points:

• (9,9): Team style. The source of production is the collaboration of people. Inside corporate aim common interest means mutual dependency, it establishes mutual trust and appreciation.

• (1,9): Country Club style. A dedicated appreciating interest in satisfying human relationships leads to friendly organizational atmosphere and a pleasant rate of work.

• (5,5): Middle of the road style. An appropriate performance may be achieved when we establish a balance between expected labor performance and maintaining a satisfying level of the moral of workers.

• (9,1): Produce or perish style. To achieve production efficiency, labor conditions are organized such a way that human aspects are neglected.

• (1,1): Impoverished style. Also called Do-nothing managerial style as manager equally does care about neither production nor people.

Contingency leadership models

There are three theories inside this group:

13.5. ábra - Table 3: The contingency styles (based on Internet 3).



Fiedler’s contingency theory. The basic principle of this theory is that different situations require diverse managerial styles. Two sorts of managerial styles are defined, task and relationship oriented. The researcher applied the least preferred co-worker test. High LPC score suggests that the leader has a humanrelations orientation, while a low LPC score indicates a task orientation (Fiedler, 1980). According to the researcher’s experiments in both favorable and unfavorable situations task oriented style is advisable, in transitional situations relationship oriented style may be considered as useful.

Vroom-Jago (1988) decision-making style. According to Daft (1997) 3 components of the model are: managerial participation styles, diagnostic questions concerning the analysis of the decisive situation and series of decision rules. There are degrees between the highly autocratic and highly democratic extremes: AI and AII are typically autocratic, CI and CII are consultative featured and G means group decision.

Hersey-Blanchard (1982) revealed that there is no best managerial style. Management is effective when it suits that situation from all aspects, in which it has to be applied. The telling style emphasizes a high concern on tasks and low on people. The selling has high concern for both. The participating has high concern on people together with relationships and the last; the delegation style has low concern for both.

According to Byrnes (2009) by a unique combination of historical circumstances and consumer driven economy, the United States has created a multibillion-dollar arts and entertainment industry that is a dynamic mix of professional for-profit and many smaller professional and nonprofessional non-profit, arts-related businesses. In the understanding of his work, there are three styles that can be used to lead and manage and arts organization and this classify managers: analytical manager, systems manager and organic manager.

The managerial style may also be considered in a process where managerial behavior changes in time. Williams (2011) analyzed the findings of Harvard Professor Hills’s (1992) researches, where she had studied the development of nineteen people in their first year as managers. Through personal interviews she had revealed the complexity of processes and examined the expectation of the managers, their subordinates and their superiors. Her study found that becoming a manager produced a profound psychological transition that changed the way these managers viewed themselves and others (Figure 3)

13.6. ábra - Figure 3: The managerial transition(based on Williams(2011)).

One finding was that after a year managers realized that their most important job was people management and human development (instead of production doing). Another indication of how much their views had changed was that most of the managers now regretted the rather heavy-handed approach they had used in their early attempts to manage their subordinates.



3. ReferencesBakacsi Gy: (2004): Szervezeti magatartás és vezetés. Aula Kiadó, Budapest.

Baracskai Z. – Berki S. – Döfli V. - Velenczei J. – Zombori J. (1988): Vezetés. Doctus Kiadó, Nyíregyháza.

Berde Cs. - Láczay M. (2005): Menedzsment. Nyíregyházi Főiskola, Nyíregyháza.

Blake, R.R. – Mouton, J.S.(1978): The New Managerial Grid. Guef Publishing, Houston.

Burns, T. – Stalker, G.M. (1962): The management of innovation. Tavistock Publications Ltd, London.

Byrnes, W. J. (2009): Management and the arts. Elsevier, Massachusetts.

Cseh-Szombathy L. – Ferge Zs: (1968): A szociológiai felvétel módszerei. Közgazdasági és Jogi Könyvkiadó, Budapest.

Daft, R. L. (1997): Management.Vanderbilt University.The Dryden Press, Fort Worth.

Fayol, H. (1918, 1984): Ipari és általános vezetés. Közgazdasági és Jogi Könyvkiadó, Budapest.

Fiedler, F.E.(1980): A hatékony vezetés személyiségtényezői és helyzeti meghatározói. In: Pataki F.: Csoportlélektan. Gondolat Kiadó Budapest.

Griffin, R.W.(1984): Management. Houghton Miffin Co., Boston, MA.

Hersey, P.- Blanchard, K. H. (1982): Management of Organizational Behavior: Utilizing Human Resources, 4th ed. Prentice Hall, Englewood Cliffs, NJ.

Hill, L.(1992): Becoming a manager: Mastery of a new identity. Harvard Business School Press, Boston.

Lewin, K. – Lippit P. – White R.K. (1975): Agresszív viselkedési sémák kísérletileg kialakított társas légkörben. In.: Pataki: Csoportdinamika. Közgazdasági és Jogi Könyvkiadó Budapest.

Likert, R. (1974): Egy érdeklődő elmélet a szervezésről, a vezetésről és az igazgatásról. In: Englander T.: Üzempszichológia. Közgazdasági és Jogi Könyvkiadó Budapest.

Papplai É. (2010): Általános közigazgatási ismeretek. Közigazgatás-szervezési és vezetési ismeret. Vizsgaanyag. Kormányzati Személyügyi Szolgáltató és Közigazgatási Képzési Központ. Budapest.

Schleicher I. (1981): A szervezetek esetlegességének az elmélete. Közgazdasági és Jogi Könyvkiadó, Budapest.

Tannenbaum, R. – Schmidt, W.H. (1996): Hogyan válasszuk meg vezetési módszereinket? In.: Sutermeister, R.A.: Ember és tevékenység. Közgazdasági és Jogi Könyvkiadó Budapest.

Taylor, F. W. (1911, 1983): Üzemvezetés-A tudományos vezetés alapjai. Közgazdasági és Jogi Könyvkiadó, Budapest.

Vroom, V. H.- Jago, A. G. (1988). The New Leadership: Managing Participation in Organizations. Englewood Cliffs, NJ: Prentice-Hall.

Warrick, D.D. (1981): Leadership styles and their consequences. Journal of Experiential Learning and Simulation 3-4: 155-172.

Williams, C. ( 2011): Management. Cengage Learning, Ohio.

Internet 1: http://leadershipchamps.wordpress.com/2008/04/27/what-is-tannenbaum-schmidt-continuum-theory-says/ (accessed on 8 June, 2012)

Internet 2: http://en.wikipedia.org/wiki/Managerial_grid_model (accessed on 8 June, 2012)

Internet 3: www.rtf.hu/Tanszekek/vezelm/ba_4.pdf (accessed on 16 June, 2012)


14. fejezet - 14. Managerial Ethics vs. Social ResponsibilityOn the night of 2-3 December 1984, disaster struck in Bhopal, India, when a massive mix of toxic gases leaked from the Union Carbide India Limited plant, spreading through shantytowns located all around the vicinity. Half a million people were injured, almost 4,000 of these severely, and estimates of an additional 4,000 and an eventual number of 12,000 total deaths have been reported in the aftermath of that single night’s events (Varma et al., 2005). Reportedly, attempts to reduce expenses at the plant had led to the safety hazards in due course causing the disaster, with half of the supervisory staff having been laid off in the months preceding the accident. Union Carbide was accused of not taking the day to day operations of its overseas businesses seriously, of failing to develop and implement proper management and intercultural strategies in situ, leading to low morale, employee distrust of company officials and, ultimately, to neglect of safety procedures and standards (Cassels, 1993). Union carbide’s PR response was dismal, at best, exacerbating the company’s problems, by pointing the finger of blame on others and attempting to side-step responsibility (Browning, 1993).

In October 2001, a scandal shook what was purportedly one of America’s corporate giants, ENRON, when it was revealed that the company had been involved with its accounting partner, Arthur Anderson – at that time one of the five largest audit and accountancy partnerships in the world -, in the largest scam to defraud investors in the nation’s history. Arthur Anderson had blatantly ‘cooked the books’ for ENRON, falsifying earnings reports to raise ENRON’s stock prices and to allow the company to offer continuously greater numbers of stocks to private investors (Dharan et al., 2004). Eventually, over $70 billion US Dollars would be lost by ENRON investors, with an even more painful $2 billion US Dollar loss by company trustees and employees from their pension and savings plans, as well as losses in stock options used by ENRON to beef up payment packages. The vast majority of all the individuals who lost money in the scandal never recovered a penny. ENRON and Arthur Anderson ceased to exist. Suicides, heart attacks and jail sentences followed; many careers died along with the companies (Healy et al., 2003). The events within, surrounding and following the fall of ENRON would serve as a prelude and a precursor to the economic disaster which would occur in 2008.

On the afternoon of April 22, 2010, an oil leak was discovered at the British Petroleum (BP) Deepwater Horizon oil rig in the Gulf of Mexico. According to the Flow Rate Technical Group, the leak amounted to about 4.9 million barrels (780,000 m3) of oil, the largest in history to ever occur in US-controlled waters (Hoch, 2010). Then-CEO Tony Hayward initially made thoughtless statements to the press, viewed as being grossly underestimating and seeking to mislead public opinion on the true impacts of the oil spill. Over 80% of Americans polled felt that BP had handled the spill very poorly (Cohen, 2010). Hundreds of billions of US dollars in losses affecting a wide range of industries along the Gulf Coast of the Southern United States, massive loss of marine life and a still undetermined secondary impact of the spill are keeping BP tangled in litigation. The final cost of this disaster is yet to be calculated, but the damage to BP in the American public is lasting. Up to 40% drops in BP fuel sales have been reported in the backlash to BP’s mismanagement of the spill.

The list of corporate scandals - deadly, monetary or both – is seemingly limitless, with the 2008 emergence of the current economic crisis only exacerbating the general public’s mistrust of big business. Public opinion aside, examined from a management science point of view, one recognized that there is actually a clash between three domains of human action, which complicate the question of how one should interrogate ethics and social responsibility in management decision making. The first of these domains is that of codified law, i.e. the legal standard applicable in the case of a questionable business decision in ascertaining whether one has actually acted outside of the law in the pursuit of profit. The second consists of the social standards of the society or societies affected by the decision in question. This is the actual realm of ethics and it is complicated by the global reach of modern business, as well as the globalized nature of the employment, goods and services markets.

In other words, what might pass as being ethical behavior at a corporation’s headquarters in London might cause a public uproar at the same corporation’s point of sale in Lahore. Further exacerbating the question of whether one acts ethically and responsibly in conducting business is, at least in democratic societies, the domain of free choice, i.e. the personal standards one brings to work as a decision maker. The actual amount of explicit control a society has over a manager’s thinking depends on the predetermined state of balance between the level of severity of the applicable legal standard on the one side, and the scope of the degree of personal freedom available to the manager in question on the other. The tipping point for this balance lies in the social standard or


14. Managerial Ethics vs. Social Responsibility

one’s consciousness of ethics, used as a means of influencing one’s behavior and thought on how freely one feels one may decide on any ethical or social issue, without fear of persecution, penalty or societal rejection.

For ethics to ‘work’ in a company’s management, the notion of obedience must be present in the corporate consciousness. More directly, the stakeholders and decision makers within a company’s management structure must agree to a set of norms and standards, through which the individual or group enforces a regime of ‘boundaries’ or ‘discipline’ on itself and others working in or for the company. The problem lies in the enforceability of this regimen. These ‘rules’ may indeed be powerful tools for governing managerial and/or employee behavior, as reflected e.g. in studies of Japanese management culture (Ala, 1999), but these rules are not equivalent with any law. Infractions against the norms or standards of a company are dealt with outside of the public domain and society may never become aware of what the guilty party might have done which could have actually affected people living outside the corporation itself.

Several examples of ethical dilemmas within companies serve to clarify how troubling such problems may be. Advertising is one particular area of business often cited as a clear example of where businesses fail to be truthful with their customers. Whether on the radio, on TV or in newspapers, magazines or as a pop-up on a website, advertising is everywhere and there has developed a stigma attached to it as a business tool used by businesses to trick the customer with false claims and distortions, in order to make money. Business would naturally respond to critics by arguing that advertising actually empowers customers, by providing them with the information about product alternatives, thereby giving them more choice on what they spend their money.

One of the latest ethical challenges to advertising, however, is found in the accusation that advertising somehow warps social values. Placement of TV ads targeting children is one such example. According to the argument, children’s programming is constantly interrupted with ads showing our children a world filled with sugar and improper nutrition: sodas and syrupy drinks of all kinds; every kind of imaginable sweet: chocolates, creams and cookies; and fatty foods: chips, sugar-coated and chocolate breakfast cereals and fast food. Missing, critics argue, are ads promoting a healthy diet and nutrition, creating a false reality for children, in which every child seen in every commercial is happily enjoying snacking and drinking whatever the child wants, whenever the child wants, and remains physically fit – day after day.

This crosses an ethical line for some. Moreover, many of these commercials come with the added promise of some special gift for purchasing the product. Stickers, wash-off temporary tattoos, small toys and even product-related online fan clubs and fan magazines place the advertised products in front of children at any and every given moment possible. This saturation of our children with what are arguably the images of an unhealthy lifestyle crosses an ethical line, as well. The reality, critics posit, is that our children are snacking and eating more unhealthy foods than ever before in human history and that they are facing burgeoning rates of diabetes, obesity and a myriad of other diet-related health problems, which will dog them for life.

Packaging and labeling pose another ethical problem for the business-customer relationship. Government regulators, consumer watchdog groups and marketing departments from every kind of company imaginable squabble over what the ‘standards of conduct’ should be in relation to ‘proper’ and ‘truthful’ product labeling.

There are, unfortunately, several infamous examples of ‘Hungarian’ products grossly mislabeled and/or packaged in such a manner to make them ‘look Hungarian’, when the packaging contents are decidedly anything but a domestic product. In 2011, several major food store chains were given serious fines for misrepresentation of foreign food products as being Hungarian, when they were actually imports. Whether one recalls the problems associated with Chinese garlic labeled with a Hungarian flag, a product sold as Szegedi paprika containing South American paprika and other chemicals or Tokaji-labeled wines produced outside of Hungary, companies have a history of unethical business practices. Aldi, for example, labeled an entire series of non-Hungarian products with the special label “Magyar Minőség” (Hungarian Quality), when the products contained no Hungarian ingredients. This behavior represents a serious violation of ethical trust in misleading Hungarian consumers. Auchan was caught in a similar gamble. Using the label “Auchan Hungaricum”, the supermarket chain proposed to pass off goods from producers in 100% foreign ownership as being Hungarian-produced. Some examples which got Auchan fines from government regulators include:

• “Rama” margarine - Unilever Kft.

• “Globus” mayonnaise - Unilever Kft.

• “Sága” Foods turkey meat containing bologna salami - SáGa Foods Zrt.



• “Omnia” coffee - Sara Lee Hungary Zrt.

• “Boci” chocolate bars - Nestlé Hungaria Kft.

• “Győri” cookies, “Pilóta” cookies - Danone Kft.

• “Sió” peach juice - Sió Eckes Kft

• “Baba” cosmetic products - Unilever Kft.

• “Borsodi” beer - Borsodi Sörgyár Zrt. (Interbrew)

• “Soproni” beer - Heineken Hungária Sörgyárak Zrt.

Complicating the issue of shoppers being able to easily identify Hungarian products is the fact that many of the product names in the list above are Hungarian in themselves or represent formerly Hungarian owned companies. Even more ethically questionable is the blatant misuse of the term “Hungaricum.” The term has been offered as a type of special pedigree since 1999, and is used variably by many areas of Hungarian society and business, to denote the uniqueness of this country and its culture. The Hungarian Parliament has, since the time of these examples of violations, voted to approve the so-called ‘Hungaricum Law’, through which the government hopes to offer protection for domestic companies of all size to produce uniquely and - unusual in their ‘Hungarianness’ - products and services of all shapes and sizes. The law is but one example of how governments attempt to force a version of ‘truth’ onto advertisers and companies.

What are the guidelines used for dealing with ethical dilemmas in business? Naturally, the most basic questions are simple, yet to the point:

• Is it legal?

• Is it right?

• Is it harmful? If so, to whom? To what degree?

• Is it beneficial? If so, to whom? To what degree?

• Does the benefit outweigh the harm and/or vice-versa?

In all the examples of business and managerial problems cited thus far, the answers to these questions should have been clear. Yet, these are exactly the questions businesses and decision makers most easily avoid answering, as they are often only abstractions, once one intellectually pushes past them and decides to base one’s decisions and actions on so-called ‘grey’ areas, i.e. to push the boundaries of ‘right’ and ‘wrong’, ‘beneficial’ and ‘harmful’. As one example, the case could be made that fruit juices are inherently beneficial for children, as they contain a wide range of vitamins and minerals promoting proper growth and development. Examined more closely, the same product, which is touted as being healthy due to its fruit content only actually contains below 15%, is full of a variety of sugars, artificial colors, aromas and flavor-boosting or altering additives, to make the product resemble a fruit juice. Indeed, sometimes products labeled as fruit juices with only 1% fruit content may be found on shelves!

In such cases, there is a second set of guidelines for dealing with ethical dilemmas, the application of which business ethicists hope would prevent decision makers in companies from acting unethically:

• Would you be willing to allow everyone to do what you are considering?

• Would you like your family to know about this?

• Would you like your decision to be printed in a newspaper, revealed online, in radio or TV news?

• Have you consulted with an objective listener, who is knowledgeable about the possible impacts of your decision?

• Are you prepared to face criticism, legal and/or criminal responsibility for your actions?

By personalizing the questions, the decision maker is confronted with him/her self as an individual and not



merely as a faceless part of a possibly giant organization. The impacts and - especially -the consequences of a business decision are brought to bear, from which, the ethicist hopes, one cannot so easily escape.

Just how accountable should, e.g. managers be towards society? After all, business could argue that managers are not public servants, but privately hired employees, and therefore only directly accountable to their companies’ shareholders. The manager’s job is to successfully run a business and not to deal with qualms about what is ‘right’ or ‘wrong’, as long as the company remains firmly within the limits of the law. Does this, in turn, mean that managers are released from any necessity to concern themselves with ethical considerations relating to their business decisions? Such an attitude would be dangerous in today’s world of instantly shared data, hidden webcams and twitter. Rather, managers should consider ethics as a set of general guidelines for helping them to make decisions about their and their companies’ futures, in order to prevent social backlash (and, thereby, a potential loss of customers), legal entanglements or simply the loss of face within their business sectors.

Managers are essentially caretakers. As they do not actually own the businesses they run, managers not only have to ensure that any decisions they make move their companies towards maximum long-term value, while prohibiting profit losses due to the consequences of the – albeit objectively or subjectively - unethical decisions they have made. In fact, the conscious making of any decision, which would knowingly diminish a company’s profits would be to cheat one’s owners and also be unethical.

Evidently, a manager might find him/herself in an ethical dilemma in the daily operations of a company or in a certain unexpected situation. What should a manager therefore do? First, if an individual is confronted by a day-to-day business operation which might be harmful to others, then that person should best choose somewhere else to work. For example, someone who believes that a product is in and of itself somehow ‘wrong’, e.g. cigarettes, alcohol, energy drinks, should understand that no one is obligated to work for a company that produces such items. While one may choose not to work for a business with subjectively ethical problems, agreeing to work for a company means accepting a salary to manage its everyday operations and signifies a trust and an obligation to the employer. The manager is therefore duty-bound to take all necessary steps to ensure that the interests of the company are best represented and pursued in all matters. Not to do so would be to act unethically – as equally unethically as some view the tobacco industry.

Some might argue that ethics place undo limits on managers in meeting their obligations to their employers, by limiting their ability to make decisions freely. This argument fails to account for the overwhelming number of daily decisions, which a manager makes to press a business activity forward without being confronted with any such limitations. Not all business activities are conducted on the edge of legality. Nor do most business decisions represent a clash between ethical conduct and a manager’s self-interest. Of course, whenever the aims of a business or the self-interest of a manager come into conflict with ethics, society – and indeed, the law – will demand that ethics take precedence.

Managers are required to act within the law, just as are all citizens and non-managerial employees at any company. Societies based on the rule of law work on a basis of respect and the mandate that all companies in all sectors and industries are presumed to be upholding the law on any given day, affecting any given decision or strategy. Without this basis, companies and industries would have to either be over-regulated or simply become government owned; both alternatives would strangle the freedom of markets and stifle economic growth by removing true decision making from the realm of actual profit-oriented business management.

Following the spirit and letter of the law will not always be ‘good’ for companies and neither does doing so represent full compliance with ethical norms, which differ at times from purely legal aspects. In business, as well as daily life, events occur and decisions are made which are strictly legal, but not always ethical, just as there are cases when the opposite applies.

For example, male calves are routinely taken from their mothers’ soon after birth and either slaughtered for sale as veal or simply shot in the head and disposed of for various other economic purposes, as males cannot give milk and therefore represent an economic liability. As long as the male calves are killed following the legal guidelines for doing so, the decision to do so and the resulting actions are completely legal. However, there are those in society who would argue that the subjectively senseless slaughter of newborn animals is unethical. Even for those of us who love the taste of veal, being confronted with the truth about where the meat comes from and how it is obtained is rarely a comfortable meeting with reality.

Critics of such decisions and actions, as seen in the preceding paragraph, would press the point of a notion of ‘ordinary decency’. This idea is a commonly used ethical standard in many societies in e.g. the Americas and



Europe, in defining how a decision maker at a company should approach business activities. If a decision ‘feels wrong’, then – as the argument is understood – it must be wrong. Equally significant is the notion, which has been developing in many societies that stakeholders in business are not restricted to those with a direct, vested interest in one, but rather anyone directly or indirectly affected by a business decision or action.

This holistic notion of a business acting as a part of a society causes varying degrees of uncertainty in business ethics. Businesses have, first and foremost, a duty to consider their own interests, as well as those of their primary stakeholders (e.g., investors, business partners, subcontractors) in order to succeed as businesses. Without this investment in each other, cooperation would be impossible, leaving such activities as logistics or construction incapable of functioning. Second, there are the employees and customers, without whom nothing could be accomplished and no profits would return on certain types of investments. Third, there are also the people involved in accountancy, banking and finance, supply chains, external communications, marketing/advertizing, organized labor and product distribution. The list could be expanded in any number of ways, depending on the business in question.

The European Union has recently weighed in with its own policy on the social responsibilities of European businesses, with the publication of its Policy on Corporate Social Responsibility (CSR). The new policy introduces an action agenda for the period 2011-2014, covering eight key areas:

• “Enhancing the visibility of CSR and disseminating good practices: this includes the creation of a European award, and the establishment of sector-based platforms for enterprises and stakeholders to make commitments and jointly monitor progress.

• Improving and tracking levels of trust in business: the Commission will launch a public debate on the role and potential of enterprises, and organize surveys on citizen trust in business.

• Improving self- and co-regulation processes: the Commission proposes to develop a short protocol to guide the development of future self- and co-regulation initiatives.

• Enhancing market reward for CSR: this means leveraging EU policies in the fields of consumption, investment and public procurement in order to promote market reward for responsible business conduct.

• Improving company disclosure of social and environmental information: the new policy confirms the Commission’s intention to bring forward a new legislative proposal on this issue.

• Further integrating CSR into education, training and research: the Commission will provide further support for education and training in the field of CSR, and explore opportunities for funding more research.

• Emphasizing the importance of national and sub-national CSR policies: the Commission invites EU Member States to present or update their own plans for the promotion of CSR by mid 2012.

• Better aligning European and global approaches to CSR:

• the Commission highlights the OECD Guidelines for Multinational Enterprises,

• the 10 principles of the UN Global Compact,

• the UN Guiding Principles on Business and Human Rights,

• the ILO Tri-partite Declaration of Principles on Multinational Enterprises and Social Policy,

• the ISO 26000 Guidance Standard on Social Responsibility.” (Sustainable 2012)

CSR is often attacked by critics who argue that, due to the voluntary nature and the lack of legal regulation over corporate social responsibility and the activities this term encompasses, CSR unintentionally lends decision-making companies even more opportunities to wield power in a society. This belief rests on the argument that companies are given too much freedom to form and define corporate social responsibility as they see fit, as well as in the ways it uses CSR as a strategy to dupe the general public into believing what is not true about how businesses operate.

One example of company’s misusing CSR to excuse unethical and unsocial behavior is the UK’s Tesco supermarket chain, which has fired thousands of employees, while touting its CSR policy: “One of our most



important values is to treat people how we would like to be treated. We try to achieve this by being a good employer and by playing our part in local communities. People tell us that they want use to use our size and success to be a force for good.” (Tesco, 2012)

14.1. ábra - Figure 1: CSR system (based on Porter - Kramer, 2006). Above, see a diagram of the intended roles of CSR within businesses.

Whatever the case or decision under criticism, ethics and social responsibility will continue to pose problems for managers, as societies and their norms are constantly changing. Only a few decades ago, smoking was common and acceptable in most public places and media. It has since become something of a pariah among the ‘vices’, taking businesses down with it. What will not change is the necessity for decision makers to remain within legal boundaries in tackling problems of operating companies and the accompanying need to think ahead to how even the near future might reflect back on what was decided, how and why.

1. ReferencesAla, M. -Cordeiro, W.P. (1999): Can we learn management techniques form the Japanese ringi process? Business Forum, 24 (½).

Browning, Jackson (1993): Jack A. Gottschalk. ed (PDF). Union Carbide: Disaster at Bhopal. Crisis Response: Inside Stories on Managing Image Under Siege. Detroit. "Union Carbide's former vice-president of health, safety and environmental programs tells how he dealt with the catastrophe from a PR point of view."

Cassels, J. (1993):The Uncertain Promise of Law: Lessons From Bhopal. University of Toronto Press.

Cohen, Jon (7 June 2010):"Behind the Numbers: Poll shows negative ratings for BP, federal government". Washington Post. (accessed 24 April 2012).

Dénes, Zoltán (18 July 2005): “A legmesszebbről importált termék, ami itthon is megterem”. Tudatos vasárló honlap. http://tudatosvasarlo.hu/cikk/legmesszebbrol-importalt-termek-ami-itthon-megterem. (accessed 7 June 2012).

Dharan, Bala G.; William R. Bufkins (2004) (PDF):Enron: Corporate Fiascos and Their Implications. Foundation Press.

European Commission (25 October 2011) (PDF): A Renewed EU Strategy 2011-2014 for Corporate Social Responsibility. Brussels. http://ec.europa.eu/enterprise/policies/sustainable-business/files/csr/new-csr/act_en.pdf. (accessed 12 June 2012).

European Commission (2012): “Sustainable and Responsible Business. Corporate Social Responsibility (CSR)” EU Enterprise and Industry Homepage. http://ec.europa.eu/enterprise/policies/sustainable-business/corporate-social-responsibility/index_en.htm. (accessed 13 June 2012).



“Hungaricum: All that is inimitable, unique, distinct – and Hungarian”. Fact Sheets on Hungary. Ministry of Foreign Affairs homepage. http://www.mfa.gov.hu/NR/rdonlyres/56997B6D-A939-4ED6-91A7-5075718B6B61/0/Hungaricum_en.pdf. (accessed 7 June 2012).

Healy, Paul M. - Krishna G. Palepu (Spring 2003):"The Fall of Enron" (PDF). Journal of Economic Perspectives 17 (2): 9. Archived from the original on 17 October 2010. (accessed 29 March 2012).

Hoch, Maureen (2010-08-02):"New Estimate Puts Gulf Oil Leak at 205 Million Gallons". PBS NewsHour (MacNeil/Lehrer Productions). (accessed 29 March 2012).

“Lecsapott a GVH: Auchan, CBA, Aldi, SPAR a feltételezett bűnös”. (24 March 2011): Agrarsektor.hu honlap. (accessed 7 June 2012).

Porter, Michael - Mark Kramer. (2006) (PDF): "The ulink Between Competitive Advantage and Corporate Social Responsibility." Harvard Business Review. http://classes.uleth.ca/200803/mgt3031d/Porter%20&%20Kramer%20HBR.pdf. (accessed 13 June 2012).

Tesco Plc. (n.d.) (PDF): “Society: Playing our part in local communities.” http://www.tesco.com/csr/downloads/pdf5.pdf. (accessed 12 June 2012).

Varma, Roli - Daya R. Varma (2005): "The Bhopal Disaster of 1984". Bulletin of Science, Technology and Society.

Weber, Harry (2010-12-19):"Time to scrap BP brand? Gas-station owners divided". Associated Press. (accessed 24 April 2012).


15. fejezet - 15. Organizational developmentAt the end of the XIX. century, F.W.Taylor, working in the heavy industry has lead to the conclusion, that the corporate he was working for was below its optimal performance level (Taylor, 1911). One of the reason for that – in his understanding - was a natural and systematic loafing of the physical workers, but the other reason was more serious, since the company was wrongly managed. From this period, many scholars first led experiments and examinations to understand how to improve the efficiency and effectiveness at the corporates. After World War II. Drucker (1946) has published the results of his examination on the operation of the General Motors, the book became bestseller still it was not appreciated by the management of the corporate. He has suggested that the company needs change (it was interesting, since the GM was on the top of his operation then) and he also suggested the implement social responsibility (Wind-Main, 2000). Iacocca (1986) working for the Ford company shortly after the II.World War noticed, that a group of high ranked Army officers consulted with the management, and they have offered their expertise to improve the operation of the company. They have offered a 10% increase in efficiency, but they also had a condition, all the group members had to be employed, and this offer was later agreed. These experts have carried out different examinations in the company (and this is why they were all called quiz kids) and soon they started to bring the results (and they name also turned into whiz kids). This obviously was one of the first initiations, which proved the justification of a systematic change of a company. In this globalized world of us, todays’ corporates must face numerous difficulties and challenges (just to mention the effect of the change of regimes, EU accession, etc.), which urge organizations to increasingly concentrate their efforts on change. Changing means adaptation, and those, who will not adapt may lose their markets, human resources, assets in minutes. A modern company of the present will not wait for the challenge; it will go in front of it and do its best to live. A frequent leverage to achieve this objective is called organizational development (OD).

In the understanding of Beckhard (1969) organizational development may be considered an effort, planned, organization-wide, and managed from the top, to increase organization effectiveness and health through planned interventions in the organization’s processes, using behavioral-science knowledge. According to Gough et al., (2009) organizational development is an ongoing, systematic procedure to make effective change in an organization.

This intervention into the life of the organization is known both as a field of applied behavioral science focused on understanding and managing organizational change and as a field of scientific study and examination. The scientific base for the intervention is originated from sociology, psychology, and mainly management. Organizational development a set of techniques for implementing planned change to make people and organizations more effective. They emphasize the role of the people in this definition, since the objective of organizational development is to influence human internal and external environment. According to McLean (2006) some have suggested that organizational development and change management are the same. The author strongly disagrees with it. Sometimes hard times are in the life of organizations, and dramatic change is needed — change that does not and cannot rely on the use of OD (such as discontinue a subsidiary’s activity or outsourcing a function). The author refers to Beer-Nohria (2000) work, where they argued that there is E change (economic value) and O change (organization’shuman capability), one of which is planned and follows OD principles (O), while the other (E) is market driven and does not follow OD principles. As a result, it is a mistake to equate OD with change management.

The justification of organizational development lies in the modern approach of becoming a manager. The American way suggests - what we may call „functional democracy” – that anyone may become a manager by learning the principles of management. Management became a profession and the practical leverage for applying the knowledge of it is the organizational development.

According to Daft (2010) organizational development may help managers to cope at least three kinds of problems:

• Mergers/acquisitions. Financial issues, change in ownership, new conditions create stress and anxiety for employees, and these negative emotions affect future performance.

• Organization decline and revitalization experience a variety of problems, including a low level of trust, lack


15. Organizational development

of innovation, high turnover, and high levels of conflicts and stress. By decreasing stress, creating open communication, and fostering creative innovation to emerge with high levels of productivity, by managing conflicts, fostering commitment, and facilitating communication.The field of decreasing conflict is so important that he emphasized it separately.

• Managing conflicts. Conflicts may occur at any time and place within a healthy organization. Organization development can help resolve these.

The kinds of problems raise the question of the intervention fields. One of the first researcher studying the operation of the organization was Fayol (1916) in his classic book “Administration Industrielle et Generale”. He has defined 5 managerial functions such as to forecast and plan, to organize, to command (leading), to coordinate and to control. According to Véry (2009) the number of managerial functions has multiplied lately, recently we may identify at least 14 managerial functions (Figure 1).

15.1. ábra - Figure 1: The change of managerial functions (based on Véry(2009)).

In the framework of a private research program, we also have tried to define managerial functions. The diverse managerial functions were sorted into the following three categories, corporate management, human resource management and process management. Inside, we have identified 22 managerial functions; organizational development is a part of organization management. Managerial functions will mean those processes inside the organization, which fundamentally constitutes of the organization from the point of view of management. Communication, conflict management, managerial style, the operation of groups, controlling are also such corporate functions, which basically influences the success of the corporation.

Kinicki-Williams (2011) stated that organizational development is often put into practice by a person known as a change agent, who is an expert/consultant with a background in behavioral sciences, and who can be a catalyst in helping organizations to deal with old problems in new ways. This agent is identical with the agent of Pataki (2004), where his function is the practical realization of the change itself. In the understanding of Daft (2009) agent is an organizational development specialist (usually a psychologist, sociologist, human resource expert or even a practicing manager), who performs a systematic diagnosis of the organization (by observation, questionnaire, interviews) and identifies work-related problems. According to McLean (2006) organizational development agent (or agents) can be employed by the organization or may be hired on a contract basis. Regardless of whether they are internal or external to the organization, there is no right answer for whether an internal consultant is better than an external consultant. The main differences between them are illustrated in Table 1.

15.2. ábra - Table 1: The advantages of using each types of consultants-internal or external (based on McLean(2006)).



Besides this role, Conner (1993) details the role of the sponsor. Citing the works of Conner (1993), Russo-Converso-Simonson (2000) have examined the function of it. A sponsor is defined as an individual or group who has the authority to legitimize and power to enforce the intervention. Sponsorship takes far more than ideas and rhetoric; it requires the ability and willingness to apply the meaningful rewards and pressure that produce desired results. There are two kinds of sponsors, initial and sustaining. An initial sponsor is defined as an individual or group who has the power to break from the status quo and sanction a significant change. An initial sponsor is usually higher in the hierarchy than those who must perform the duties of sustaining sponsors (Conner, 1993). A sustaining sponsor is defined as one who supports and follows through with the sponsor commitment and allocation of resources for his/her arena of influence. A sustaining sponsor has enough proximity to local targets, those individuals or groups who must actually change, to maintain focus and motivation on the change goals. They also define the role of the advocate, who are individuals or groups who wants to achieve a change but lacks the power to sanction it (such as stakeholders). However, advocates are influential and valued for the advice and recommendations given to the sponsor and others.

Organizational development requires numerous things, human participation, leverages, and usually financing funds, as well. The fundamental sources of it may be the following:

• Private funds. Many organizations have identified the importance of internal development, and this is why they spend many on it.

• Subsidies. After the EU accession, Hungary has accessed communal sources to promote EU integration. In the last years, we have witnessed organizational development projects mainly at municipalities and civic organizations.

According to Daft (2009) the process of organizational development may be best illustrated by the change management process of Lewin (1947):

• Unfreezing: a stage for awareness of change and motivation for people to change

• Change-people affected may experience new necessary behaviors and skills (intervention)

• Refreezing: new attitudes, values, behaviors are acquired and these also should be reinforced.

According to Kinicki-Williams (2011) organizational development works as medical-like model (Figure 2):

15.3. ábra - Figure 2: The organizational development medical like model (based on Kinicki-Williams (2011)) by adapting the work of French-Bell(1978) and Huse-Cumming(1985)).



First part of organizational development is usually the diagnosis. To make this diagnosis, consultants may apply the following tools to access information on current state of the art:

• Survey-it is usually a structured leverage where information is required from many people (usually laborers/customers/partners are required to fill it in). The basis of that is the questionnaire itself, in diverse forms. We must note that many methods exist developed by diverse consultants (companies). We must refer to a specific leverage which is one of the most sophisticated ones, available and suggested on European level, the Common Assessment Framework model and its questionnaire (examining 9 criteria and 28 sub-criteria in more than 38 pages)

• Personal interview-it is a qualitative tool to access preliminary or explaining information about the conditions, its leverage is the guideline.

• Focus group. Organizational groups are suitable to provide integrated information on the conditions of the organization. There are numerous ways to access to information, by the application of SWOT analysis, structured (and ranked) problem mapping, and many other ways of creative groups techniques (such as Delphi, Philips 66, etc.)

• Content and document analysis. Documents of the organizations may also reveal conditions of operation. Typical documents to examine are the different documents of the establishment, job descriptions, work contracts, organizational and operational code, ethical codes, etc.

• Kocsis (1994) considers screening the sum of those methods, which experimentally enables to define reasons for the decrease of efficiency. Special techniques are the following: day records (recording activities in a day), instrumental work measure (measuring actual performance), Kahne-model (qualifying the diverse products), portfolio analysis (evaluating system of products of corporates), function analysis (analyzing job functions), motion study (analyzing every movements), general assembly technology screening (for the praparation of developments), „Palwon” corporate diagnostic method(by comparing ill and healthy states), Ishikawa-diagram (for the presentation of reason-effect relationships) and finally the Radius-diagram (by comparing performance parameters).

By the application of one or more leverages a picture of the corporate conditions may be revealed. Sometimes it is obvious to apply specific methods for specific target groups (such as do a survey of among laborers and make interviews with the managers) and the target groups are also advised to be separated at the analysis (such as laborers will not answer embarrassing questions in the presence of the managers). The results of the analysis usually are recorded in a study.

Considering intervention, Daft (2010) has described the most popular and effective techniques:

• Team building activities. The building of teams promotes the cohesiveness and success of organizational groups and teams. Numerous organizational activities may be better realized by teams, and another function is to bring members together (together with the decrease of confrontations) and increase organizational commitment. There are numerous types of team building; most important classification is the indoor (such as internal games, competitions) and outdoor ones such as excursions, challenge games).

• Survey-feedback activities. This method starts with a questionnaire distributed to employees on values, climate, participation, leadership, and group cohesion within their organization. After that, the



organizational development consultant meets with groups of employees to analyze responses, and here employees are engaged in problem solving based on the data.

• Large-group interventions. The large-group intervention method gathers together participants from all parts of the organization, often with the involvement of key stakeholders to understand and discuss problems or opportunities. The idea is to include everyone who has a stake in the change.

In the phase of evaluation original objectives are compared with the results. The original state should be faced with the situation after the development, where sources of information (leverages) may be similar to the preliminary analysis. Feedback is necessary when we have not achieved the goal we defined, unfortunately many organizations focus on the development itself and really do not care about measuring its effects.

Kinicki-Williams (2011) - regarding the effectiveness of the organizational development procedure - noted some suggestions based on examinations:

• Not a single intervention should be planned. It means that interventions which equally aim at many functions have been found working better than single ones.

• Managerial commitment largely contributes to the success.

• Short and long term objectives should be set.

• The organizational development process should be paired with culture specifications, since one intervention which works in one country may not operate in the other one.

1. ReferencesBeckhard, R. (1969): Organization Development: Strategies and Models. Addison-Wesley, Reading.

Beer, M. – Nohria, N. (2000): Cracking the code of change. Harvard Business Review, May-June

Berde Cs.- Láczay M. (2005): Menedzsment. Nyíregyházi Főiskola, Nyíregyháza.

Conner, D. R. (1993): Managing at the Speed of Change. Villard Books, New York.

Daft, R.L.(2009): Management. South-Western Cengage Learning. Mason.

Drucker, P. F. (1946): Concept of the corporation. The John Day Company, New York.

Fayol, H. (1918, 1984): Ipari és általános vezetés. (Administration Industrielle et Generale) Közgazdasági és Jogi Könyvkiadó, Budapest.

French, W.L. - Bell, C.H. (1978): Organization development. Behavioral interventions for organizational improvements.Prentice Hall-Englewood Cliffs, New York.

Gough, J. – Harper, K.A. – Hill, S.D. – Selden, H.M. ed. (2009): Encyclopedia of Management. Cengage Learning, Gale.

Huse, E.G. - Cummings,T.G. (1985): Organizational development and change. West, St.Paul.

Iacocca, L. (with Novak, W)(1986): An autobiography. Bantam, New York.

Kinicki, A. - Williams, B.K. (2011): Management- a practical introduction. McGraw-Hill/Irwin. New York.

Kocsis, J.(1994): Változások menedzselése. Műszaki Könyvkiadó, Budapest.

Lewin, K. (1947): Frontiers in Group Dynamics: Concepts, Method, and Reality in Social Science,” Human Relations 1.

McLean, G.N (2006): Organization Development: Principles, Processes, Performance. Berrett-Koehler Publishers, San Francisco.



Pataki B.: 2004. Változásmenedzsment oktatási segédlet. Budapesti Műszaki és Gazdaságtudományi Egyetem, Budapest 52 p.

Russo-Converso, J.A. - Simonson, M. (2000): Large-scale Education Reform:

Role of Change Partners, Specifically Sponsors and Advocates. http://www.icte.org/T01_Library/T01_204.PDF (accessed on 13 June, 2012).

Taylor, F.W.(1911): The principles of scientific management. Harper and brothers, New York.

Véry Z.(2009): Funkcionális kontrolling. Raabe Kiadó, Budapest.

Wind, J.Y. - Main, J. (2000): Változástervezés. Vállalatok felkészítése a XXI. századra. Geomédia Szakkönyvek, Budapest.


16. fejezet - 16. QuestionsChapter 1.

• Define management and discuss the role(s) and function(s) of the modern manager.

• How has management evolved and how is it still evolving?

• What are the most determinate skills a manager must possess?

• What factors most influence decision-making?

• What is MBO?

Chapter 2.

• The theory of management?

• May management be acquired?

• Basic managerial tasks?

• Managerial roles by Mintzberg?

• Classic managerial schools?

• The school of human relations?

Chapter 3.

• What factors led to the creation of hierarchies in businesses and which ones are changing business management structures today?

• What factors can influence the overall structure of a business organization?

• What are the most predominate organizations registered in Hungary?

• How do mechanistic and organic organizations differ?

Chapter 4.

• What is an organization?

• Organizational paradigms?

• What kind of life cycle theories do you know?

• Which are the main structural features?

• The definition and principles of labor division?

• The definition of authority and its regulation?

• Coordinational tools?

• The content of configuration?

Chapter 5.

• Economic typology?

• Characteristics of a linear organization?


16. Questions

• The understanding of a functional organization?

• What are the most important features of the mixed form?

• The terms division, division types?

• The introduction of matrix organizations?

Chapter 6.

• What are Mintzberg’s 5 and why are they so important?

• Discuss how an organization's goals determine its structure.

• Discuss the element of control on organizational structures.

• In what ways are bureaucracies different from non-government businesses in structure and management?

• In what ways are adhocracies determinate in how online businesses, software and telecommunications technology companies thrive or fail?

Chapter 7.

• How would you define the concept of groups?

• Classification-what sorts of groups do you know?

• Detail the dynamics of groups!

• What are the most important features of inter-group relationship?

Chapter 8.

• Detail the classic approach!

• What is the approach of human relations?

• What creative techniques do you know?

• What is process approach?

• What are the specific syndromes of the operation?

Chapter 9.

• What is the concept of culture?

• What is the concept of corporate culture?

• What are the functions of corporate culture?

• What are its elements?

• Define and detail one classification of cultures!

• What is changing culture, type, success?

Chapter 10.

• Explain using examples the difference between general and concrete managerial methods.

• Compare and contrast the strengths and weaknesses of MBO.


16. Questions

• Discuss in detail examples of where management by delegation and management by participation might be best employed in organizations.

• Discuss a manager’s role within a TQM-run company.

• Provide examples of businesses using the traditional approach and those using continuous improvement. In what ways do their products/services predetermine which approach best suits the company?

Chapter 11.

• What is change?

• Would you define the stages and states of change?

• The classification of changes?

• Which are the personal reasons for resistance?

• Which are the orgnaizational reasons for resistance?

• How activity and resistance form during the process of change?

• The evaluation of change management methods?

Chapter 12.

• Introduce the activity curve in the process of change!

• Introduce the change management roles!

• Define some anomalies during change.

• Introduce the Zaltman-Duncan (1977) change management strategies

• Introduce Kotter’s 8 step change method!

Chapter 13.

• What is managerial style?

• What is the difference between Classic and Contingency approaches?

• What are the typical Factors affecting style?

• Describe one of the following classification: focus on decision, personality and contingency!

Chapter 14.

• What examples of mishaps have led to the development of the concept of social responsibility in businesses?

• What is CSR and how successful is it?

• What are the factors shaping managerial ethics within a culture and globally?

• What are the differences between morals and values and how do these shape management decision making?

• Discuss examples of how discussions of ethics are shaping post-2008 businesses.

• How might the current economic crisis and its related scandals shape management vis-à-vis ethics and socially responsible conduct?

Chapter 15.

• Detail the history of organizational development!


16. Questions

• Describe the concept of the organizational development!

• What organizational development tools do you know?

• Detail the dynamics of organizational development!

• What are the success factors?
